You have been hired to help a factory that produces nails. The factory can produce nails at a rate of 20,000 per hour and the factory runs 7 hours a day for 250 days per yéar. The annual demand for the nails is 2,800,000. It costs $100 to set up production runs for the nails. Each nail costs $0.03 to produce. The annual inventory holding costs are $0.02 for one nail. Please answer the following: (a) ignoring the production rate when determining the optimal order quantity. In other words, the manager wants to order an integer amount of nails according to the EOQ framework. Determine the amount of nails the manager orders to be produced at a time. (b) Determine the integer amount to order according to the POQ framework, the max inventory level according to this policy, the cycle time, and the amount of time spent in the 'production phase' during each cycle. (c) ordering the optimal level in (b) instead of (a). Note that although the manager ignores the production rate in (a), costs are accumulated according to the cost function associated with when we do have a production phase in our inventory cycle (i.e., the one that leads us to derive the POQ). The manager of the factory insists on Determine the amount of savings that results from
You have been hired to help a factory that produces nails. The factory can produce nails at a rate of 20,000 per hour and the factory runs 7 hours a day for 250 days per yéar. The annual demand for the nails is 2,800,000. It costs $100 to set up production runs for the nails. Each nail costs $0.03 to produce. The annual inventory holding costs are $0.02 for one nail. Please answer the following: (a) ignoring the production rate when determining the optimal order quantity. In other words, the manager wants to order an integer amount of nails according to the EOQ framework. Determine the amount of nails the manager orders to be produced at a time. (b) Determine the integer amount to order according to the POQ framework, the max inventory level according to this policy, the cycle time, and the amount of time spent in the 'production phase' during each cycle. (c) ordering the optimal level in (b) instead of (a). Note that although the manager ignores the production rate in (a), costs are accumulated according to the cost function associated with when we do have a production phase in our inventory cycle (i.e., the one that leads us to derive the POQ). The manager of the factory insists on Determine the amount of savings that results from
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Transcribed Image Text:You have been hired to help a factory that produces nails. The factory can produce
nails at a rate of 20,000 per hour and the factory runs 7 hours a day for 250 days per yéar.
The annual demand for the nails is 2,800,000. It costs $100 to set up production runs for the
nails. Each nail costs $0.03 to produce. The annual inventory holding costs are $0.02 for one
nail. Please answer the following: (a)
ignoring the production rate when determining the optimal order quantity. In other words,
the manager wants to order an integer amount of nails according to the EOQ framework.
Determine the amount of nails the manager orders to be produced at a time. (b)
Determine the integer amount to order according to the POQ framework, the max inventory
level according to this policy, the cycle time, and the amount of time spent in the 'production
phase' during each cycle. (c)
ordering the optimal level in (b) instead of (a). Note that although the manager ignores the
production rate in (a), costs are accumulated according to the cost function associated with
when we do have a production phase in our inventory cycle (i.e., the one that leads us to
derive the POQ).
The manager of the factory insists on
Determine the amount of savings that results from
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