Determine allowable setup cost, Advanced Statistics

Assignment Help:

A metal fabrication process uses a die-cast metal fastener at a uniform rate of 300 units per year. Currently, this item is currently purchased from an external supplier at a unit cost of $12, with an ordering cost of $30 per order. This fastener could be produced internally on a batch production basis at a variable cost of $11.20 per unit. There is sufficient capacity available to sustain a production rate of 1,000 units per year during the manufacture of this item. The firm's inventory holding cost rate is $0.25/$/year, but the setup cost for producing a batch of this metal fastener cannot be estimated accurately at this time.

(a)    What is the maximum allowable setup cost per batch for this item, such that it is more desirable (based on relevant costs alone) to produce it internally, rather than buying it from the current external source?

(b)   After conducting a thorough time study, it is estimated that the setup cost for this fastener would be $180 per production batch. In the meantime, the Vice President of Parking has issued a company-wide order requiring that the average investment in the inventory (disregarding safety stock) of any produced or purchased metal part is not to exceed $500. If this restrictive order is to be followed, should the metal fastener in question be produced internally or purchased? What is the production or procurement (as the case may be) lot size and the consequent annual total relevant cost for this fastener?

(c)    A second potential supplier for this part has offered the following price schedule:

Purchase Lot Size (Units):    1-49            50 -199           200-499           500 or More   

  Unit Price ($ per Unit):       12.20             11.98                11.80               11.50

Is your decision in part (b) affected by this new information, if the Parking VP's order is rescinded?


Related Discussions:- Determine allowable setup cost

Financial Econometrics Assignment help- postgarduate, Hi , Im currently ta...

Hi , Im currently taking the course Financial Econometrics of Master of Finance at RMIT. I find it really difficult to understand the course''s material and now im having the majo

Breusch-pagan test, The Null Hypothesis - H0:  There is no heteroscedastici...

The Null Hypothesis - H0:  There is no heteroscedasticity i.e. β 1 = 0 The Alternative Hypothesis - H1:  There is heteroscedasticity i.e. β 1 0 Reject H0 if Q = ESS/2  >

Cross over design, The type of longitudinal study in which the subjects rec...

The type of longitudinal study in which the subjects receive different treatments on the various occasions. Random allocation is required to determine the order in which the treatm

Hypotheses, a company suppliers specialized, high tensile Pins to customers...

a company suppliers specialized, high tensile Pins to customers. It uses an automatic lathe to produce the pins. Due to the factors such as vibration, temperature and wear and tear

Explain missing values, Missing values : The observations missing from the ...

Missing values : The observations missing from the set of data for some of the reason. In longitudinal studies, for instance, they might occur because subjects drop out of the stud

Hill-climbing algorithm, Hill-climbing algorithm is  an algorithm which is ...

Hill-climbing algorithm is  an algorithm which is made in use in those techniques of cluster analysis which seek to find the partition of n individuals into g clusters by optimizin

Linear regression, regression line drawn as Y=C+1075x, when x was 2, and y ...

regression line drawn as Y=C+1075x, when x was 2, and y was 239, given that y intercept was 11. calculate the residual

Quittingill effect, Quittingill effect is a  problem which occurs most fre...

Quittingill effect is a  problem which occurs most frequently in studies of the smoker cessation where smokers frequently quit smoking following the onset of the disease symptoms

Biplots, Biplots: It is the multivariate analogue of the scatter plots, wh...

Biplots: It is the multivariate analogue of the scatter plots, which estimates the multivariate distribution of the sample in a few dimensions, typically two and superimpose on th

Chi-squared distribution, Chi-squared distribution : It is the probability ...

Chi-squared distribution : It is the probability distribution, f (x), of the random variable de?ned as the sum of squares of the number (v) of independent standard normal variables

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd