Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 4: Q21OQ. (page 583)

The MRP gross requirements for Item X are shown here for the next 10 weeks. The lead time for A is two weeks, and the setup cost is \(9. There is a carrying cost of \)0.02 per unit per week. The beginning inventory is 70 units.

Week

Gross requirement

1

20

2

10

3

15

4

45

5

10

6

30

7

100

8

20

9

40

10

150

Use the least total cost or the least unit cost lot-sizing method to determine when and for what quantity the first order should be released.

Short Answer

Expert verified

20 unitsshould be ordered to cover the needs for the periods in the least-cost method.

Step by step solution

01

  Lot size and least unit cost

The ordering size is selected because the desire for another "n" times is satisfied, while "n" isthe second-lowest price per unit is calledthe least unit cost. The required volume of a product ordered for productionis referred to as thelot size.

02

Lot size: Least unit cost

The setup cost is $9Lead time is 2 weeks


The carrying cost is $0.02 as per requirements.


The least total cost method uses the following equation:

Total Cost = Setup Cost + Carrying Cost + Unit Cost

Using the values from the question, we get the following:

Total Cost = 9 + 0.02(70) + 0.1(20)

Total Cost = $11.40

20 units should be ordered to cover the needs for the periods in the least-cost method.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Develop a production plan and calculate the annual cost for a firm whose demand forecast is fall, 10,000; winter, 8,000; spring, 7,000; summer, 12,000. Inventory at the beginning of fall is 500 units. At the beginning of fall, you currently have 30 workers, but you plan to hire temporary workers at the beginning of summer and lay them off at the end of summer. In addition, you have negotiated with the union an option to use the regular workforce on overtime during winter or spring if overtime is necessary to prevent stock-outs at the end of those quarters. Overtime is not available during the fall. Relevant costs are hiring, \(100 for each temp; layoff, \)200 for each worker laid off; inventory holding, \(5 per unit-quarter; backorder, \)10 per unit; straight time, \(5 per hour; over time, \)8 per hour. Assume that the productivity is 0.5 units per worker hour, with eight hours per day and 60 days per season.

This identifies the specific materials used to make each item and the correct quantities of each.

Explain the need for the time fences in the master production schedule.

The widespread scientific application of yield management began within what industry?

What is the term for a computer program often used to facilitate database queries that are not part of a standard ERP system?
See all solutions

Recommended explanations on Business Studies Textbooks

Managers

Read Explanation

Operational Management

Read Explanation

Human Resources

Read Explanation

Introduction to Business

Read Explanation

Influences On Business

Read Explanation

Intermediate Accounting

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free