A part is produced in lots of 1200 units. It is assembled from 2 components wort

Question

A part is produced in lots of 1200 units. It is assembled from 2 components worth $50 total. The value added in production (for labor and variable overhead) is $40 per unit, bringing total costs per completed unit to $90. The average lead time for the part is 4 weeks and annual demand is 3800 units, based on 50 business weeks per year.

A. (1) How many units of the part are held, on average, in cycle inventory?
600 units. (Enter your response as an integer.) (2)What is the dollar value of this inventory? $
54000. (Enter your response as an integer.)

B.(1) How many units of the part are held, on average, in pipeline inventory?
304 units. (Enter your response as an integer.)

(2) What is the dollar value of this inventory? ( Hint: Assume that the typical part in pipeline inventory is 50 percent completed. Thus, half the labor and variable overhead cost has been added, bringing the unit cost to $70 , or $50 + $40 /2.) (QUESTION IN HERE) The dollar value of the inventory is $ ??????????
(Enter your response as an integer.)

Explanation / Answer

A.1) Cycle inventory = Lot size / 2 = 1200 / 2 = 600 units

B.1) Average number of units in pipeline inventory

= Weekly demand x Lead time ( weeks )

-= Yearly demand / 50 weeks x 4 weeks

= 3800 / 50 x 4

= 304 units

2) Dollar value of each unit ( as explained ) = $70

Therefore , dollar value of this inventory = $70 x 304 = $21280

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