production control

Good Essays
1) The manager of an automobile repair shop hopes to achieve a better allocation of inventory control efforts by adopting an A-B-C approach to inventory control.
a) Given monthly usages in the following table, classify the items in A, B and C categories according to dollar usage:
Item Usage Unit Cost
4021 90
$1,400
9402 300 12
4066 30
700
6500 150 20
9280 10
1,020
4050 80
140
6850 2,000 10
3010 400 20
4400 5,000 5

a) In descending order:
Item
Usage x Cost
4021
$126,000

Category
A

4400
4066
6850

25,000
21,000
20,000

B
B
B

4050
9280
3010
9402
6500

11,200
10,200
8,000
3,600
3,000
228,000

C
C
C
C
C

b) Determine percentage of items in each category and percentage of total cost for each category. Category Percent of
Items

Percent of Total
Cost

A

11.1%

57.8%

B

33.3%

30.2%

C

55.6%

11.9%

2) A large bakery buys flour in 25-pound bags. The bakery uses an average of 4,860 bags a year.
Preparing an order and receiving a shipment of flour involves a cost of 10$ per order. Annual carrying costs are 75$ per bag.
a) Determine the economic order quantity.
b) What is the average number of bags on hand?
c) How many orders per year will there be?
d) Compute the total cost of ordering and carrying flour. e) If ordering costs were to increase by 1$ per order, how much would that affect the minimum total annual cost?

D = 4,860 bags/yr.
S = $10
H = $75
DS
a) Q = 2H = 2(4,860)10 = 36 bags
75
b) Q/2 = 36/2 = 18 bags
c) D = 4,860 bags = 135 orders

Q

36 bags / orders

TC = Q / 2H +

d)
e) Q =
TC =

D
S
Q

=

36
4,860
(75) +
(10) = 1,350 + 1,350 = $2,700
2
36

2(4,860)(11)
= 37.757
75

37.757
4,860
(75) +
(11) = 1,415.89 + 1,415.90 = $2,831.79
2
37.757

Increase by [$2,831.79 – $2,700] = $131.79

3) A manager receives a forecast for next year. Demand is projected to be 600 units for the first half of the year and
900

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