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Question 3 Pegasus Engineering Pic uses circuit boards in its electronic hand tools that it manufactures, and this usage is relatively constant throughout the year.

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Question 3 Pegasus Engineering Pic uses circuit boards in its electronic hand tools that it manufactures, and this usage is relatively constant throughout the year. The rm demand for the component is 5 unit per year. These circuit boards are purchased From a supplier For $313 each. and the lead time is two [2} days. The holding cost per unit per year is 5% of the unit cost and the ordering cost per order is 3630'. There are 250 working days per year. Required: A. i. Calculate the economic order quantity {ED-Q} ii. Given the E00. determine the total annual inventory cost. iii. l[L'Ilutline three assumptions of the EOE} Model B. The Firm wants to reconsider the decision of haying the circuit boards and is considering making the circuit boards inhouse. Management has determined that setup costs would be $511} and 5D circuit boards could he produced in a day. once the machine has been set up. Management estimates that the cost 1' including lahour time and materials] ot~ producing one unit would be $23. The holding cost would he |% of this cost. Required: i. 1|What is the daily demand rate? ii. What is the optimal production quantity? iii.) Given the optimal production run size, what is the total annual inventory cost'.' {1 vi.) Given that the lead time is two days. what is the reorder pointtRP}? r

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