Assignment 10

# Assignment 10 - Wagner Fabricating Company 1 Holding Cost...

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Wagner Fabricating Company 1. Holding Cost Cost of capital 14.0% Taxes/Insurance (24,000/600,000) 4.0% Shrinkage (9,000/600,000) 1.5% Warehouse overhead (15,000/600,000) 2.5% Annual rate 22.0% 2. Ordering Cost 2 hours at \$28.00 \$56.00 Other expenses (2,375/125) 19.00 Cost per order \$75.00 3. Set-up Cost 8 Hours at \$50.00 \$400 per set-up 4. & 5. a. Order from Supplier - EOQ model C h = IC = 0.22 (\$18.00) = \$3.96

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2 2(3200)75 * 348.16 3.96 o h DC Q C units Number of orders = D / Q = 9.19/year Cycle time = 250( Q ) / D = 250(348.16) / 3200 = 27.2 days Reorder Point: P (Stockout) = 1 / 9.19 = 0.1088 r = 64 + 1.24(10) = 76.4 Safety stock = 76.4 - 64 = 12.4 Maximum inventory = Q + 12.4 = 360.56 Average inventory = Q /2 + 12.4 = 186.48 Annual holding cost = 186.48(3.96) = \$738.46 Annual ordering cost = 9.19(75) = \$689.35 Purchase cost = 3200(\$18) = \$57,600 Total annual cost = \$59,027.81 64 z = 1.24 Stockout
b. Manufacture - Production lot size model C h = IC = 0.22(\$17.00) = \$3.74 P = 1000(12) = 12,000/year Note: The five-month capacity of 5,000 units is sufficient to handle annual demand of 3,200 units.

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Unformatted text preview: 2 2(3200)(400) * 966.13 (1 / ) (1 3200 /1200)3.74 o h DC Q D P C Number of producTon runs = D / Q = 3.31/year Cycle ±ime = 250( Q ) / D = 250(966.13) / 3200 = 75.48 days Reorder point: P (Stockout) = 1 / 3.31 = 0.3021 r = 128 + 0.52(20) = 138.4 Safety stock = 138.4 - 128 = 10.4 Maximum inventory = (1 - 3200/12000)966.13 + 10.4 = 718.89 128 z = 0.52 Stockout Annual holding cost = (354.25 + 10.4)(3.74) = \$1363.79 Annual set up cost = 3.31(400) = \$1363.79 Manufacturing cost = 3200(\$17) = \$54,400 Total Annual Cost = \$57,088.67 6. Recommend manufacturing the part Savings: \$59,027.81 - 57,088.67 = \$1,939.14 (3.3%) CitaTon Anderson, Sweeney, Williams, Camm, and MarTn. QuanTtaTve Methods in Business GBS220. 13th ed. Mason: Cengage Learning, 2010. Print....
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