Dee and Carol are owners of a company supplying
Dr. C. KyddBUAD 306Exercise 6Inventory/MRP1.Dee and Carol are owners of a company supplying tin cans to countries at war.This war tin company has had a history of lack of control, particularly in the productioninventory area. Both Dee and Carol expect to sell 900 cases of tin cans over the next year(300 days), but they are uncertain as to how they should procure and inventory the cans.Dee prefers to order the cans from an outside supplier where he can obtain themat $50.00 a case to be delivered within 2 days of an order. He estimates ordering cost at$20.00/order. Annual carrying charges include 15% interest charge along with insuranceand taxes that amount to $2.50 per unit of average inventory (these are two separatecosts).Carol prefers to produce the cans internally. She claims that the company has thecapacity to produce 6 cases a day. The setup cost (ordering) and carrying costs remainthe same as if the cans were purchased outside.a. What would be the inventory policy if Deeâs scheme is followed?b. What would be the inventory policy if Carolâs scheme is followed?c. Which would you recommend and why?d. Suppose Dee finds a dealer that will give him a 2% discount if he orders morethan 900 cases at a time. Would your recommendation change? Explain.e. Suppose that Carol wants to investigate the possibility of backordering cases ofcans. She estimates that the stockout cost would be only $.50 per case per year.What is Carolâs optimal inventory policy in this case?f. What is your final suggestion to Dee and Carol concerning the inventory policythat they should adopt? Why?Illustrate each of the above inventory policies with the appropriate diagrams.2.A product has the following bill of materials:A. Final Product2B Assembly3HPart2C AssemblyD SubAssemblyF RawMaterial2EPart3GRawMaterialF RawMaterial3EPartYou also have the following information:ItemABCDEFGHOnHand5001000100030050020004002500Time toProduce11111322Receipts:ScheduledQuantity1000100060004000To be receivedin week:__1212Prepare an MRP schedule for all of the components in the product to cover an8-week planning horizon. Estimated demand for the final product is 3000 units inWeek 7 and 4500 units in Week 8.
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