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A production manager has obtained the following estimated costs/revenues for producing a new orbital impact wrench. Their plan is to produce that particular model wrench
A production manager has obtained the following estimated costs/revenues for producing a new orbital impact wrench. Their plan is to produce that particular model wrench for at least 5 years. Yearly Sales = 4,200 units/year Sales Price = $500/unit Variable Cost = $255/unit (no learning is involved) Initial Investment = $1,000,000 Annual maintenance = $200,000 (to refresh tools after each 12 months of use) (2) A.1. Does the company break even during year 1, Yes or No? (2) A.2. How many units does it take the company to make/sell to break-even the first time? (2) A.3. How much total profit does the company make over the 5-year period? Part B: (2) Calculate the Economic Order Quantity (EOQ) for the following scenario: Procurement Processing Cost: $10,000 Daily Demand: 97 Total Inventory Holding Cost: $2,832.40/year
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