SPC buys polystyrene resin from a supplier in 1000-pound units, and each unit co
ID: 351176 • Letter: S
Question
SPC buys polystyrene resin from a supplier in 1000-pound units, and each unit cost $20.00, and the percent holding cost is 15%. The fixed shipping cost per order is $300.If we assume that 1000 pounds of resin yields 1000 pounds of clear plastic, what are the following values for clear plastic?
Find:
A. Cycle Inventory
B. Holding Cost
C. Flow Time
Data:
- 1000-pound units
- $20.00 Cost per Unit
- 15%: Holding cost per year
- $300 Shipping cost
- Annual Demand:
- Black Plastic: 23,967
- Clear Plastic: 29,760
Explanation / Answer
d= 1000 pound units
Here demand D for clear Plastic= 29,760
Set up cost S= $300
Holding cost per year H= 15%
Unit cost C = $20.00
Optimal lot size Q* = SQRT((2DS)/H)
A. Cycle Inventory = Q/2
Q= SQRT((2DS)/H)= SQRT( (2*29760*300)/20*0.15)= 2439.67
Cycle Inventory= Q/2 = 1219.83
B. Holding cost
= (Q/2)*% Holding cost * C =. 1219.83 * 0.15*20 = 3659.49
C. Flow Time
= Q/2d = 2439.67/ 2*1000 = 1.21 month
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