Good Kitchen sells a popular blender with the demand of 175/month. Good Kitchen purchase the blenders from its supplier at the unit cost of $2.50 and the cost of placing an order has been estimated to be $12.00. Good Kitchen uses an inventory carrying charge of I = 27% per year.

Determine (a) the optimal order quantity, (b) the order frequency, and (c) the annual holding and setup cost. If, through automation of the purchasing process, the ordering cost can be cut to $4.00, what will be (d) the new economic order quantity, (e) the order frequency, and (f) annual holding and setup costs? Explain these results.

3

A standing desk consists of a desk top, four legs, and two adjustment motors. Each leg fastens to the desk top with one fastener set. Each adjustment motor requires two fastener sets for attachment to the legs. Currently there is one order outstanding, to make 180 standing desks. There are 500 legs and 20 desk tops in inventory. There are no other large items in inventory, and no scheduled receipts.

(a) Draw the product structure tree.

(b) Calculate the net requirements to fulfill the outstanding order.

4

The following table shows the bill of material for Product A. The gross requirements for A are 200 units in week 6 and 250 units in week 8. Develop the MRP tables for each item for an 8-week planning period. Use the lot-for-lot lot-sizing rule.

A -----------> B (1) -------> L (4)

A -----------> M (2)

Item Lead Time Quantity on Hand Scheduled receipts

A 1 0

B 2 20 30 in week 2

L 2 0

M 1 20 10 in week 1

5

The following table shows the demand for fans manufactured by Leonard's Fan Company. The holding cost for that item is $2 per month and each setup costs $80. Lead time is 0 months. Calculate the planned order releases using: (a) the EOQ technique, and (b) the POQ technique. What are the costs of each plan, including the holding cost of any inventory left over after month 7?

Month 1 2 3 4 5 6 7

Requirement 400 150 200 150 100 150 250