JL.53 Bob's Bumpers has a repetitive manufacturing facility in Kentucky that makes automobile bumpers and other auto body parts. The facility operates 350 days per year and has annual demand of 55,000 bumpers. They can produce up to 395 bumpers each day. It costs $85 to set up the production line to produce bumpers. The cost of each bumper is $106 and annual holding costs are $23 per unit. Setup labor cost is $25 per hour.
1) What is the optimal size of the production run for bumpers? (Display your answer to the nearest whole number.) Incorrect
2) Based on your answer to the previous question, and assuming the manufacturer holds no safety stock, what would be the average inventory for these bumpers? (Display your answer to the nearest whole number.)
3) Based on your answer two questions back, how many production runs will be required each year to satisfy demand? HINT: As a general rule, whenever calculating a value that is based on previous calculations in Excel, always be sure to use cell references rather than a rounded value as a calculation input. (Display your answer to the nearest whole number.)
4) Suppose the customer (an auto manufacturer) wants to purchase in lots of 510 and that Bob's Bumpers is able to reduce setup costs to the point where 510 is now the optimal production run quantity. How much will they save in annual holding costs with this new lower production quantity? (Display your answer to two decimal places.)
5) How much will they save in annual setup costs with this new lower production quantity? (Display your answer to two decimal places.)
1) Optimal size of the production run for bumpers, Q= √[2DS/H(1-d/p)]
Given annual demand, D = 55,000 bumpers for 350 days
Hence daily demand rate, d= 55000/350= 157.14
Daily production rate, p = 395 bumpers
Set up cost= $85
Annual holding cost= $23 per unit
Q= √[2*55000*85/23(1-157.14/395)]= 821.64≈822 bumpers
2) Average inventory for the bumpers = Maximum inventory level/2
Maximum inventory level = Q(1-d/p)= 821.64(1-157.14/395)= 494.77
Hence average inventory= 494.77/2 = 247.39≈247 bumpers
3. Production runs that will be required each year to satisfy demand = D/Q = 55000/821.64= 66.94≈67 production runs
4. Annual holding cost= average inventory level*holding cost per unit per year
Annual holding cost when (Q=821.64)= 247.39*23= $5689.89
New optimum order quantity= 510 units
Annual holding cost= average inventory level*holding cost per unit per year= Q/2(1-d/p)H= 510/2(1-157.14/395)23= $3531.77
Hence savings in annual holding cost= 5689.89-3531.77= $2158.12
5. Annual setup cost with Q= 510
S= [Q^{2}H(1-d/p)]/2D= [510^{2}x23(1-(157.14/395))]/(2*55000)
= $32.749
Annual setup cost = (D/Q)S= (55000/510)32.749= $3531.77
When (Q= 821.64 and S=85);
Annual setup cost = (55000/821.64)85 = $5689.84
Savings in annual setup cost with the new lower production order quantity = 5689.83- 3531.76 = $2158.07
JL.53 Bob's Bumpers has a repetitive manufacturing facility in Kentucky that makes automobile bumpers and other...
JL.53 Bob's Bumpers has a repetitive manufacturing facility in Kentucky that makes automobile bumpers and other auto body parts. The facility operates 290 days per year and has annual demand of 75,000 bumpers. They can produce up to 330 bumpers each day. It costs $59 to set up the production line to produce bumpers. The cost of each bumper is $131 and annual holding costs are $37 per unit. Setup labor cost is $28 per hour. What is the optimal...
Please show your work so I can understand this portion, Thank you! JL.51 Carl's Custom Cans produces small containers which are purchased by candy and snack food producers. The production facility operates 260 days per year and has annual demand of 13,800 units for one of its custom cans. They can produce up to 120 of these cans each day. It costs $43.31 to set up one of their production lines to run this can. (Carl pays $18 per hour...
Need help within 30 minutes please! JL.52 A producer of industrial climate control modules has recently changed to cellular manufacturing. The production facility operates 250 days per year and has annual demand of 6,500 units They can produce up to 80 modules each day. It costs $18.50 to set up a work cell to produce this module. The cost of each module is $32 and annual holding costs are $4 per unit. Setup labor cost is $14 per hour. What...
JL.61 A producer of refrigerator compressors wants to implement a just-in-time production line to support demand from a neighboring appliance manufacturer. Demand from the appliance manufacturer is for 285 compressors a day. The production lead time is 4 days and the producer wants to have a 18% safety stock factor. This producer has also cut setup costs such that the optimal production quantity is 93 units. How many kanbans does this producer of compressors require? (Display your answer to the...
IM.82 A distributor of industrial equipment purchases specialized compressors for use in air conditioners. The regular price is $40, however, the manufacturer of this compressor offers quantity discounts per the following discount schedule: Option Plan Quantity Discount A 1 - 299 0% B 300 - 1,299 0.50% C 1,300+ 1.00% The distributor pays $80 each time it places an order with the manufacturer. Holding costs are negligible (none) but they do earn 13% annual interest on all cash balances (meaning...
IM.81 An appliance distributor in Arizona has high-volume sales for an ice cleaner solution. The manufacturer of this cleaner offers quantity discounts per the following discount schedule Quantity Unit Price 1 - 399 $15.00 400 - 1,199 $14.50 1,200+ $14.00 The appliance distributor pays $60 each time it places an order with the manufacturer. Holding costs are $4.50 per unit. Annual demand is expected to be 3,600 units. 1. Based on this information, which quantity discount option should you select?...
Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 11,900 flashing lights per year and has the capability of producing 95 per day. Setting up the light production costs $49. The cost of each light is $0.95.The holding cost is $0.10 per light per year. a) What is the optimal size of the production run? _ units (round your response to the nearest...
A distribution center for a sporting goods retailer places orders with manufacturers for a variety of items. Among these is a standard skateboard, targeted to first-time skate boarders. The regular price is $20.00, however, the manufacturer of this skateboard offers quantity discounts per the following discount schedule: Option Plan Quantity Discount A 1 - 999 0% B 1,000 - 2,499 0.50% C 2,500+ 1.75% The retailer pays $75 each time it places an order with the manufacturer. Holding costs are...
A chemical plant produces sodium bisulfate in 150 kg bags. Demand for this product is 20 tonnes per day. The capacity for producing this product is 55 tonnes per day. Setup cost is $320, and storage and handling costs are $150 per tonne per year. The company operates 220 days a year. (Note: 1 tonne = 1,000 kg). a. What is the optimal number of bags per production run? (Round your intermediate calculations to 2 decimal places and the final...
M. P. VanOyen Manufacturing has gone out on bid for a regulator component. Expected demand is 700 units per month. The item can be purchased from either Allen Manufacturing or Baker Manufacturing. Their price lists are shown in the table. Ordering cost is $50, and annual holding cost per unit is $4 Allen Quantity Unit Price Quantity $16.00 15.50 Unit Price 1-499 $16.10 15.60 5.10 400-799 1000+ 15.00 a) What is the economic order quantity if price is not a...