Determine the duration of the active production interval

Assignment Help Operation Management

Reference no: EM132126818

An operation manager of a chemical manufacturing plant must determine the lot size for a chemical that has a steady demand of 1,450 litres per day. The production rate is 6,850 litres per day, setup cost is $200, annual holding cost is $0.21 per gallon, and the plant operates 350 days per year.

a. Determine the production order quantity (POQ), the number of orders and the time between orders. What is the total annual setup cost? What is the total holding cost per year? Using an appropriately labelled diagram, graph setup cost, holding cost, and total inventory cost, and show the optimal production order quantity and the minimum total inventory cost. What is the setup time in hours, based on a $25 per hour setup labour cost?

b. Determine the duration of the active production interval, t. Determine the maximum inventory. Determine demand during the production interval.

c. As part of its new JIT program, the company has signed a long-term contract with its customers and the company will take orders electronically for the engines. The lot size (production order quantity) will drop to 20,000 litres. Determine the new setup cost per order and the number of orders (setups). What is the total annual cost of managing the inventory with the new policy? What is the setup time in hours, based on a $25 per hour setup labour cost with the new policy?

Reference no: EM132126818

Questions Cloud

Organizational methods are effective for project management : This should include a candid assessment of the project's achievements relative to its plan. What organizational methods are effective for project management?

Use to ensure you keep your project within scope-on budget : What type of monitor and control tools would you use to ensure you keep your project within scope, on budget, and completed on time?

Proceed in updating what you see as obsolete approaches : With a college business degree in hand, you are headed for a job in the family business. How should you proceed in updating what you see as obsolete approaches?

Firm to make relative to market research and size of order : What are the right decisions for the firm to make relative to the market research and the size of the order?

Determine the duration of the active production interval : Determine the duration of the active production interval, t. Determine the maximum inventory. D

Calabresi-melamed theory of transaction costs : Using (explicitly) the Calabresi-Melamed theory of transaction costs, justify the following rights by a property rule or a liability rule:

The concept of automatic storage-retrieval systems : The concept of Automatic Storage/Retrieval Systems (ASRS) is not new, it’s been around for many years.

Calculate the overall risk factor for this project : Calculate the overall risk factor for this project. Would you assess this level of risk as low, moderate, or high? Why?

Determine the production order quantity : Determine the production order quantity (POQ), the number of orders and the time between orders. What is the total annual setup cost?

User Account

All Pages