Develop a lot-for-lot solution and calculate total relevant costs for the gross
ID: 371249 • Letter: D
Question
Develop a lot-for-lot solution and calculate total relevant costs for the gross requirements in the following table*. Period 1 2 3 4 5 6 7 8 9 10 11 12 Gross requirements 20 40 30 70 20 10 70 60 Holding costs $3.50/unit/week; setup cost $150, lead time= 1 week, beginning inventory-40. Develop a lot-for-lot solution (enter your responses as whole numbers) Period Gross requirements On-hand at beginning of period40 On-hand at end of period Order receipt Order release 1 2 3 4 5 6 7 89 10 1 40 30 70 20 10 70 60Explanation / Answer
Please find below filled up NRP table as required :
Order qty”Lot-for-Lot, Lead time : 1 week
1
2
3
4
5
6
7
8
9
10
11
12
Gross requirement
20
40
30
70
20
10
70
60
On hand at beginning of period : 40
40
20
20
0
0
0
0
0
0
0
0
0
On hand at end of period
20
20
0
0
0
0
0
0
0
0
0
0
Order receipt
0
0
20
0
30
70
20
0
10
70
0
60
Order release
0
20
0
30
70
20
0
10
70
0
60
0
It is to be noted that:
Under such situation . Order receipt = Gross requirement – On hand at beginning of period
Since Lead time = 1 week, Order receipt for period t = Order Release for period t-1
“On hand at end of period “ = Gross requirement – On hand at beginning of period – Order receipt
On hand at end of period = On hand at beginning of period – Gross requirement
We presume that set up cost is incurred everytime an order is released
There are 7 numbers of Order Releases .
Therefore , total set up cost = $150 x 7 = $1050
Given, Holding cost = $3.50/unit / week
There are 20 + 20 = 40 units which are held up in inventory for week. Therefore total holding cost = $3.5 x 40 = $140
Hence, Total relevant cost = Gross Holding cost + Gross Set up cost = $1050 + $140 = $1190
Order qty”Lot-for-Lot, Lead time : 1 week
1
2
3
4
5
6
7
8
9
10
11
12
Gross requirement
20
40
30
70
20
10
70
60
On hand at beginning of period : 40
40
20
20
0
0
0
0
0
0
0
0
0
On hand at end of period
20
20
0
0
0
0
0
0
0
0
0
0
Order receipt
0
0
20
0
30
70
20
0
10
70
0
60
Order release
0
20
0
30
70
20
0
10
70
0
60
0
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