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Pork Bellies is considering manufacturing ready-made meals in the new processing plant.The company is planning on working 250 working days per year and has devised
Pork Bellies is considering manufacturing ready-made meals in the new processing plant.The company is planning on working 250 working days per year and has devised the following estimates on sales of the new product:
Daily Sales
Probability
400
0.5
500
0.3
600
0.1
700
0.1
- The annual carrying cost per unit is $0.40
- Set-up time to manufacture the meals is 20 minutes for each of the 5 machines involved in preparing the meals and it costs $24.50 per hour for operators to set the machines up.
- Manufacturing overhead is charged out at a rate of $12.50 per machine hour.
- The ready-made meals are packaged in recyclable containers and cost $3.00 per 10 pack.The containers are sourced from Western Australia and can take anywhere between 15 to 20 days to arrive and have the following probability estimates:
Days to fill order
Probability
15
0.30
16
0.15
17
0.15
18
0.15
19
0.15
20
0.10
Required:
- Calculate the economic size for each production run (3 marks)
- When should an order for more containers be placed, based on expected values? (3 marks)
- How can ordering be handled to eliminate stock-outs 9 out of 10 times without holding large amounts of containers? (4 marks)
- Explain the differences in the basic philospophies underlying the JIT and EOQ approaches to inventory management (5 marks)
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