Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

AquaFlow Inc., a prominent water heater manufacturer, is faced with a critical decision regarding the produc - tion location for their latest water heater models,

AquaFlow Inc., a prominent water heater manufacturer, is faced with a critical decision regarding the produc-tion location for their latest water heater models, domestically or internationally. Their production facility isdesigned to manufacture 60 water heaters every week, with a standard deviation of 24. Given the high laborcosts, the CEO has set a challenge for the COO to achieve a 95% Type 1 service level using a base-stockordering policy with weekly orders. Domestic production takes 6 weeks, while international production takes13 weeks with a standard deviation of 3 weeks.Domestic Production:a. Determine TIP, cycle stock, pipeline stock, and safety stock for production.b. Calculate the number of inventory turns each year.c. Using the TIP chosen in part (a), what is the Type 2 service level?d. What is the TIP and safety stock that would correspond to a 95% Type 2 service level?International Productione. Determine TIP, cycle stock, pipeline stock, and safety stock.f. Calculate the number of inventory turns each year.Assume that the unit production cost for domestic production is $3,500, and unit transportation cost is$250. For the international option, the production cost is $1,700 and unit transportation cost is $1,000.g. Assuming that the quality of internationally and domestically produced goods are the same, is it finan-cially reasonable for AquaFlows to purchase the new water heaters domestically?h. If not, what cost per unit do they need to be at for production in order to match international costs? Orwhat cost per unit internationally do foreign suppliers need to be at for production in order to be competitive?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Technology Business Management

Authors: Todd Tucker

1st Edition

0997612746, 978-0997612745

More Books

Students also viewed these General Management questions

Question

Understand corporate and HRM strategy.

Answered: 1 week ago