REQUIREMENT #4 (25 points): Electronex maintains a continuous inventory of its h
ID: 342580 • Letter: R
Question
REQUIREMENT #4 (25 points): Electronex maintains a continuous inventory of its highest qualty circuit board he company and that are needed to meet the demand for the end items that use the always assumed that the demand for the circuit boards is constant at year. Each circuit board costs $14.50. The holding cost is determi 18% of the cost of each circuit board held and it can produce 25,000 circuit boards per year. It costs 1 production run of its circuit boards. boards. The company has 7.200 circuit boards per in inventory. Electronex operates 250 days per year lectronex $150 to set up each (SHOW YOUR WORK) a. (10 points) Determine the optimal order quantity for the circuit board inventory assumptions and conditions. y under these b. (5 points) Given this inventory plan, how long will each production run take? c. (5 points) Given this inventory plan, what is the largest number of circuit boards on hand? d. (5 points) Given this inventory plan, how long is the inventory's cycle time?Explanation / Answer
Given are :
Annual demand for circuit board = D = 7200
Daily demand of circuit board = d = 7200 per year/ 250 days =28.8
Daily production of circuit board = p = 25000 per year/ 250 days = 100
Set up cost of circuit board = Cs = $150
Annual unit holding cost of circuit board = Ch = 18% of $14.50 = $2.61
Therefore, Optimal order quantity ( EPQ )
= Square root ( 2 x Cs x D /Ch x ( 1 – d/p))
= Square root ( 2 x 150 x 7200 / 2.61 x ( 1 – 28.8/100))
= Square root ( 2 x 150 x 7200 / 2.61 x 0.712)
= 1078.11 ( 1078 rounded to nearest whole number )
OPTIMUM ORDER QUANTITY = 1078 CIRCUIT BOARDS
= Optimal order quantity ( EPQ)/ Daily production
= 1078/100
= 10.78 days
EACH PRODUCTION RUN WILL TAKE 10.78 DAYS
c)While p units are produced every day, d units get consumed simultaneously everyday . This results in inventory build up of ( p – d ) units per day
Number of days it takes to produce optimal order quantity = EPQ/p
Therefore maximum inventory build up
= Daily inventory build up x Number of days to produce optimal order quantity
= ( p – d) x EPQ/p
= EPQ x ( 1 - d/p)
Therefore largest number of circuit boards on hand
= EPQ X ( 1 – d/p)
= 1078 x ( 1 - 28.8/100)
= 1078 x 0.712
= 767.53
LARGEST NUMBER OF CIRCUIT BOARDS ON HAND = 767.53
d)We will define inventory cycle time as the time it takes to turnover its average inventory
Average inventory = ½ x EPQx( 1 – d/p) = ½ x 1078 x 0.712 =383.77
Daily requirement = d = 28.8
Therefore , inventory cycle time = 383.77 /28.8 = 13.32 days
INVENTORY CYCLE TIME = 13.32 DAYS
OPTIMUM ORDER QUANTITY = 1078 CIRCUIT BOARDS
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