A-CAT Corp is a mid-size manufacturer and distributor of domestic electrical appliances. Rather than compete with large-scale operations prevalent in the industry, A-CAT prefers to focus on the rural segment. It manufactures a wide-range of electrical appliances for household use, including television signal boosters, transformers, FM radio kits, battery charges, etc., catered to rural, low-income customers.

The OM of A-CAT, Sunita Menon, is assigned the task of preparing the operating plan for the next weeks for the product P0110, which was a regular order. P0110 is an assembly of two P0X units and two P0Y units. Each P0X unit requires four P1X1 units and three P1X2 units. The final product has a unit price of Rs200. When Menon checked the inventory, she found that 240 P0110 units are already in the stock. Menon not only wants to decide how much to produce to meet the requirements, but also how to produce economically, taking into account the forecasted value of demand.

The following MPS table shows the number of P0110 units to be assembled for the next 8 weeks.

Weeks	4	5	6	7	8	9	10	11
Weekly net requirements	200	100	300	420	300	450	250	520

The following Exhibit shows the BOM with lead times and on-hand inventories

Item No	Part No	Quantity	Level	Lead Time (weeks)	On-hand inventory
1	P0110	1	0	2	240
2	P0X	2	1	1	500
3	P0Y	2	1	1	350
4	P1X1	4	2	1	600
5	P1X2	3	2	1	600

Finally, the following table shows the item cost and setup costs (inventory carrying cost is 10% of the item cost per year).

Item	Cost per unit (Rs)	Setup cost (Rs)
P0110	200	500
P0X	65	400
P0Y	35	350
P1X1	05	430
P1X2	15	400

Questions:

1. Help Sunita Menon decide the total cost of P0110 units by using lot-for-lot technique.
2. What is the effect on the cost of the P0110 units if EOQ technique is used instead of lot-for-lot? (Hint: You can consider the demand information for the given 8 weeks as an accurate forecast for the entire year by appropriate normalization.)
3. Can you find another lot sizing schedule that would lower the costs even further?
4. Using the lot-for-lot sizing for P0110 units, prepare the MRP matrix for the lower level items (only for lot-for-lot heuristics) and compute their total inventory holding & setup costs