Need #4 only

EOQ with Setup Costs

Morrison Manufacturing produces casings for sewing machines: large and small. To produce the different casings, equipment must be set up. The setup cost per production run is $18,000 for either casing. The cost of carrying small casings in inventory is $6 per casing per year; the cost of large casings is $18 per unit per year. To satisfy demand, the company produces 2,400,000 small casings and 800,000 large casings.

Required:

1. Compute the number of small casings that should be produced per setup to minimize total setup and carrying costs.

fill in the blank 1 small casings

2. Compute the setup, carrying, and total costs associated with the economic order quantity for the small casings.

Setup cost	$fill in the blank 2
Carrying cost	$fill in the blank 3
Total cost	$fill in the blank 4

3. What data analytic type was used in Requirement 1 (descriptive, diagnostic, predictive, or prescriptive)? Justify your selection. See Exhibits 2.5 and 2.6, for a brief review of data analytics.

As a data analytic model, EOQ gives the batch size that minimizes the total inventory cost and, therefore, is

descriptivediagnosticpredictiveprescriptiveprescriptive

as it identifies the batch size that

should beshould not beshould be

produced.

4. Suppose that Morrisons production engineer indicates that he has a method to reduce setup time; consequently, he predicts the setup cost will be reduced to $180. What will be the EOQ if this method works as predicted? fill in the blank 7 small casings

Now indicate what data analytic type is being used.

DescriptiveDiagnosticPredictivePrescriptivePredictive