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QUESTION 2 Ricardo is currently working on a lot sizing decision in his shop. The net requirements for a material from an MRP schedule are:

QUESTION 2

Ricardo is currently working on a lot sizing decision in his shop. The net requirements for a material from an MRP schedule are:

Week

1

2

3

4

5

6

7

8

Net requirements

600

800

1200

1650

2100

1350

700

800

  • Annual Demand = 60,000 over a 50-week-per-year (average of 1,200 units per week)
  • It costs $3,000 to set up the machines
  • It costs $2.00 when one unit of product is kept in inventory for one week
  • No beginning inventory

a) Develop a lot-sizing schedule for lot-for-lot (LFL)

Week

1

2

3

4

5

6

7

8

Net requirements

600

800

1200

1650

2100

1350

700

800

Beginning

Inventory

Production

Lot

Ending

Inventory

Average

Inventory

Setup Costs =

Inventory Holding Costs =

Total Costs =

b)Develop a lot-sizing schedule for Economic Order Quantity (EOQ)

EOQ =

Week

1

2

3

4

5

6

7

8

Net requirements

600

800

1200

1650

2100

1350

700

800

Beginning

Inventory

Production

Lot

Ending

Inventory

Average

Inventory

Setup Costs =

Inventory Holding Costs =

Total Costs =

c)Develop a lot-sizing schedule for Least Total Cost (a.k.a. Part Period Balancing (PPB))

Target Economic Part Period (EPP) =

Periods Combined Lot Size EPP

Week

1

2

3

4

5

6

7

8

Net requirements

600

800

1200

1650

2100

1350

700

800

Beginning

Inventory

Production

Lot

Ending

Inventory

Average

Inventory

Setup Costs =

Inventory Holding Costs =

Total Costs =

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