Engine assembly plant and motorcycle assembly plant

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Reference no: EM13190064

HD has its engine assembly plant in New York and its motorcycle assembly plant in LA. Engines are transported between the two plants using trucks, with each trip costing $1,000. The motor plant assembles and sells 300 motor each day. Each motors costs $500, and HD incurs a holding cost of 20% per year.

(i) How many motors should HD load onto each truck? What is the cycle time of inventory of gear at HD? Graph the variable costs and total cost as a function of order quantity.

(ii) If the lead time to ship the engines from New York to LA is 2 weeks, what is the reorder level at the assembly plant in LA (assume 7 days per week)?

(iii) As part of its initiative to implement just-in-time (JIT) manufacturing at the motor assembly plant, HD has reduced the number of motors loaded on each truck to 100. If each truck trip still costs $1,000, how does this decision impact annual inventory costs at HD compared to the EOQ value? What should the cost of each truck be if a load of 100 motors is to be optimal for HD?

Reference no: EM13190064

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