1. Exercises with the MRP spreadsheets
   1. Assume that the standard costs are as follows:
   1. Using"MRP Spreadsheet.xls",

Material	Standard cost
A	$25
B	$15
C	$5
X	$50

1. Assume that inventory holding costs are 2% per month.
2. Assume an MPS schedule for X as follows:

Period	MPS plan
0	10
1	15
2	30
3	25
4	30
5	50
6	60
7	60
8	20
9	30
10	40

1. Calculate the average inventory for each item over periods 1-10.
2. Assume for simplicity, that the 10-month average is roughly equivalent to the 12-month average inventory level.
3. Calculate the annualized inventory holding cost for each item, and for all materials in total. Do not forget that 2% per month is NOT 24% per year -- you have to compound the interest.
4. What is the impact on production planning and on holding costs for each of the independent scenarios indicated below. Not only should you be considering holding costs, but also any other issues that you may encounter with the various plans. Consider feasibility, smoothness (or lack thereof) of the schedule, setup issues, storage issues.
   1. Double the lot size for all items
   2. Double safety stock levels for all items
   3. Reduce safety stock to zero (0) for all items
   4. Reduce the lot size in all components by a significant amount. Do this in three stops for all items:

Item	Original lot size	Reduce to #1	Reduce to #2	Reduce to #3
X	15	10	5	1
A	33	20	10	1
B	40	20	10	1
C	100	75	50	1