Suppose that an EOQ model will be used to resupply the item

Assignment Help Operation Management

Reference no: EM131698130

Scott’s Vacuum Cleaner Manufacturing Company produces 24,000 vacuum cleaners per year. One component part is required that is currently manufactured at one of its own facilities. It costs the company $10 per component, plus $20 to initiate a production order. They estimate that they have capacity to produce up to 40,000 components per year. Assume that holding costs are based on 24% annual interest.

Suppose that a supplier has offered to supply the items at the same costs ($10/component with a $20 order cost). Suppose that an EOQ model will be used to resupply the item.

Suppose that the supplier has been chosen to supply the items at a cost of $10/component, but that demand is random with a standard deviation of 500/month. Assume leadtime for orders is one month, and the manufacturer charges the supplier a penalty of $2/component/month for each shortage.

If the manufacturer decides to order every month, explain the policy that should be used to maintain a 95% Type I service level, including order size, reorder point, etc.

Reference no: EM131698130

Questions Cloud

Firms use to promote an ethical business culture : Describe ethical orientation as the practices that firms use to promote an ethical business culture.

Who are unable-unwilling to provide all required information : How can instructional designers gather task information from subject matter experts who are unable or unwilling to provide all the required information?

Corporate social responsibility-online marketing strategy : What, if any, practices of corporate social responsibility (CSR) do they exhibit? Is there a factor of showing it in any online marketing strategy?

Do you think the high-end designer apparel brands : Do you think the high-end designer apparel brands, such as Gucci, Chanel, or Prada, sell their goods direct to consumers through the Internet?

Suppose that an EOQ model will be used to resupply the item : Suppose that a supplier has offered to supply the items at the same costs. Suppose that an EOQ model will be used to resupply the item.

Decrease costs and increase customer satisfaction : Where can information be used to decrease costs and increase customer satisfaction?

Explains the differences between the EPQ and EOQ options : What explains the differences between the EPQ and EOQ options?

Inventory-what are order size-cost-maximum inventory level : Scott’s Vacuum Cleaner Manufacturing Company produces 24,000 vacuum cleaners per year. What are the order size, cost, and maximum inventory level?

Predictability and control to your firm : Your manager asks you to explore whether or not a Program Management Office (PMO) would help bring more predictability and control to your firm.

User Account

All Pages