A company produces an end item 'F'. One unit of item 'F' can be made by assembling 1 unit of X, 2 units of Y, and 3 units of Z. Each X is made of 2 units of Z and 2 units of A; each Y is assembled using 3 units of B and 1 unit of C. On-hand inventories are 90 units of X and 150 units of Z. Scheduled receipts are 50 units of X at the beginning of week 1, 200 units of Z at the beginning of week 2, and 50 units of C at the beginning of week 1. Lead times for X and C are one week, and lead times for other components are two weeks. Final assembly of F requires one week.

1. Fill in Table 1 to prepare a master production schedule for end item 'F' using the fixed period of 2 rule. The beginning inventory for F is 160; the forecast and promised customer orders for end item F are provided in this table. [4 marks]

Week	1	2	3	4	5	6	7	8
Forecast	50	70	75	60	80	70	70	60
Customer Orders (committed)	55	30		20	5		10
Projected On-hand Inventory
Net Inventory Before MPS
MPS Receipt
MPS Start
Available-to-promise inventory (uncommitted)

2. Use your master production schedule (i.e., MPS Start) in Table 1 to develop a material requirement plan (MRP) for the component X using the lot-for-lot policy. [4 marks]

X Lead time: 1 week On hand: 90

Week	1	2	3	4	5	6	7	8
MPS Start for F
Gross Requirement
Scheduled Receipts
Projected On Hand
Net Requirements
PO Receipts
PO Releases

3.Use your master production schedule in Table 1 and your MRP schedule for the component X to develop a material requirement plan (MRP) for component Z using the lot-for-lot ordering policy. [4 marks]

Z Lead time: 2 weeks On hand: 150

Week	1	2	3	4	5	6	7	8
Gross Requirement
Scheduled Receipts
Projected On Hand
Net Requirements
PO Receipts
PO Releases

4.You are required to calculate the total inventory cost for component Z during the eight weeks. Note that, for each week, the inventory cost includes a fixed cost and a holding cost. We assume that the per order fixed cost is $800/order, and the unit holding cost is $1 per item per week. The fixed cost is incurred each time when the firm places an order. More precisely, if the firm places an order at the beginning of a week, then the firm incurs the fixed cost for this week; otherwise, the fixed cost for the week is zero. The holding cost is calculated according to the number of remaining items at the end of each week. For example, if 10 units of component Z are remaining at the end of a week, then the holding cost for this week is 10 $1 = $10. [4 marks]

Answer:

5. Use your master production schedule in Table 1 and your MRP schedule for the subassembly X to develop a material requirement plan (MRP) for component Z using lot size ordering with a lot size of 650. [4 marks]

Z Lead time: 2 weeks On hand: 150

Week	1	2	3	4	5	6	7	8
Gross Requirement
Scheduled Receipts
Projected On Hand
Net Requirements
PO Receipts
PO Releases

7. Calculate the total inventory cost for the fixed order quantity (with lot size = 650) in Question 6. The per order fixed cost is still $800/order, and the unit holding cost is still $1 per item per week. Determine if the policy of fixed order quantity is better than the policy of lot-for-lot. [Hint: Compare the total inventory costs for two policies to see which one is smaller.] [4 marks]