Reference no: EM131989312

One of the tutors previously provided a great answer, but can you elaborate on "Peak Inventory" and "Cycle Time". Please see original question and the answer below.

Ashlee's Beach Chairs Company produces upscale beach chairs. Annual demand for the chairs is estimated at 1,000 units. The frames are made in batches before the final assembly process. Ashlee's final assembly department needs frames at a rate of 20 per week. Ashlee's frame department can produce 25 frames per week. The setup cost is $100/setup, the annual holding cost per frame is $4, and the cost of production $30 a frame. The company operates 50 weeks per year. Set up an optimum inventory system for Ashlee that would minimize the annual cost of the inventory system. Find the following: 

a. Production quantity (Q) 

b. Number of production runs 

c. Length of production run (tp) 

d. Peak inventory 

e. Average inventory 

f. Idle time (ti) 

g. Cycle time 

h. Number of cycles 

i. Total annual inventory cost (T) 

j. Total annual cost of the system (TS) 

ANSWER

capacity p=25 per week

demand u = 20/week

Demand D = 1000 per year

Set up cost = $100

Holding cost H = $4

T = 50 weeks

Production Quantity Q = ??√??H??2DS??????? ??×?? ??√??p-u??p??????? = ??√??4??2∗1000∗100??????? ??×?? ??√??25-20??25??????? = 500

Cycle time = ???u??Q???? = ???20??500????  = 25 week

Number of runs per year = ???Cycletime??T???? = ???25??50????  = 2 length of production run = ???p??Q???? = ???25??50???? = 2 week

Peak Inventory = Quantity produced average inventory = Q/2 = 500/2 = 250

Ideal time = amount of time the production is waiting for orders = 50 - (1000/25) = 10 weeks

Cycle time = ???u??Q???? = ???20??500????  = 25 week

Total inventory cost = QH/2 = 500*4/2 = $1000

Total cost = set up cost + inventory cost + cost of production = 100*1000/500 +1000 + 30*1000 = 200+ 1000 +30000 = $31,200