Concept explainers
a.
Interpretation:The sources that should be used and the size of the standing orders are to be calculated.
Concept introduction: Standing orders areexercised to enablenormallyperiodic charges to the similar vendor over a definite period.
b
Interpretation: The optimal value of the holding and set up costs for wafers are to be computed.
Concept introduction: Holding costs are those related with storage inventory that remains unsold.These prices are 1 component of total stock costs, along with ordering & shortage costs where as set up charges is the cost acquired to get equipment to get equipment to procedure a diverse batch of goods.
c
Interpretation:The re-order point based on the on-hand level of inventory of wafers is to be calculated.
Concept introduction: Re-order point is the level of stock which generates an act to refill that inventory stock. It is a least amount of an article which anestablishmentgrasps in inventory, such that, when inventorydrop to this sum, the article must be ordered.
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Production and Operations Analysis, Seventh Edition
- A purchasing agent for a particular type of silicon wafer used in the production ofsemiconductors must decide among three sources. Source A will sell the siliconwafers for $2.50 per wafer, independently of the number of wafers ordered. Source Bwill sell the wafers for $2.40 each but will not consider an order for fewer than3,000 wafers, and Source C will sell the wafers for $2.30 each but will not acceptan order for fewer than 4,000 wafers. Assume an order setup cost of $100 and anannual requirement of 20,000 wafers. Assume a 20 percent annual interest rate forholding cost calculations.b. What is the optimal value of the holding and setup costs for wafers when theoptimal source is used?arrow_forwardSuppose that a firm has the option to make or buy a part. Its annual requirement is 11,000 units. A supplier is able to supply the part at $6 per unit. The firm estimates that it costs $800 to prepare the contract with the supplier. To make the part, the firm must invest $29,000 in equipment, and the firm estimates that it costs $3 per unit to make the part. COSTS MAKE OPTION BUY OPTION Fixed Cost $29,000 $800 Variable Cost $3 $6 Annual Requirement = 11,000 units 1. What is the break-even point? Round your answer to the nearest whole number. 2. What is the total cost at the break-even point? Round your answer to the nearest dollar. 3. What is the total cost for the make option? Round your answer to the nearest dollar.arrow_forwardA company is planning to purchase 10,000 units of a particular item in the year ahead. The item is purchased in boxes each containing 10 units of the item, at a price of €400 per box. The cost of holding an item in inventory for a year (including insurance, interest and space costs) is 10% of the purchase price. The cost of placing and receiving orders is to be estimated from cost data collected relating to similar orders, where costs of €7,000 were incurred on 25 orders. It should be assumed that ordering costs change in proportion to the number of orders placed. 5% should be added to the above ordering costs to allow for inflation. Assume that usage of the item will be even over the year. Required: (a) Calculate the economic order quantity (EOQ) in boxes which minimises total costs (b) Outline when and why it is appropriate to use economic batch quantity (EBQ)arrow_forward
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- The bullwhip effect (also known as the Forrester effect) is defined as the demand distortion that travels upstream in the supply chain from the retailer through to the wholesaler and manufacturer due to the variance of orders which may be larger than that of sales. What causes the bullwhip effect in supply chain? Demand forecast updating: Members of the supply chain updating their demand forecasting Order batching: Members of the supply chain rounding up or down the quantity of orders Price fluctuations: Usually driven by discounting resulting in larger quantities of purchases Rationing and gaming: Buyers and sellers delivering over or under their order quantities An example of the bullwhip effect Let’s consider a retailer sells on average 10 ice creams per day in the summer season. Following a heatwave the retailer's sales increase to 30 units per day, in order to meet this new demand, the retailer increases their demand forecast and places an increased order on the wholesaler…arrow_forwardA manufacturer has a production facility that requires 15,604 units of component JY21 per year. Following a long-term contract, the manufacturer purchases component JY21 from a supplier with a lead time of 7 days. The unit purchase cost is $25.6 per unit. The cost to place and process an order from the supplier is $121 per order. The unit inventory carrying cost per year is 10.5 percent of the unit purchase cost. The manufacturer operates 250 days a year. Assume EOQ model is appropriate. If the manufacturer uses a constant order quantity of 2,640 units per order, what is the annual holding cost? Use at least 4 decimal places.arrow_forwardThe soft goods department of a large department store sells 175 units per month of a certain large bath towel. The unit cost of a towel to the store is $2.50 and the cost of placing an order has been estimated to be $12.00. The store uses an inventory carrying charge of 25% of the acquisition cost per year. The supplier of the bath towel is offering a discount of $25 off each order if orders are placed in quantities of 500. Should the department store place orders for 500 units?arrow_forward
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