Wilson Publishing Company produces books for the retail market.
Demand for a current book is expected...
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Finance
Wilson Publishing Company produces books for the retail market.Demand for a current book is expected to occur at a constant annualrate of 7,700 copies. The cost of one copy of the book is $13. Theholding cost is based on an 20% annual rate, and production setupcosts are $165 per setup. The equipment on which the book isproduced has an annual production volume of 27,000 copies. Wilsonhas 250 working days per year, and the lead time for a productionrun is 17 days. Use the production lot size model to compute thefollowing values:
Minimum cost production lot size. Round your answer to thenearest whole number. Do not round intermediate values.
Q* =
Number of production runs per year. Round your answer to twodecimal places. Do not round intermediate values.
Number of production runs per year =
Cycle time. Round your answer to two decimal places. Do notround intermediate values.
T = days
Length of a production run. Round your answer to two decimalplaces. Do not round intermediate values.
Production run length = days
Maximum inventory. Round your answer to the nearest wholenumber. Do not round intermediate values.
Maximum inventory =
Total annual cost. Round your answer to the nearest dollar. Donot round intermediate values.
Total annual cost = $
Reorder point. Round your answer to the nearest whole number.Do not round intermediate values.
r =
Answer & Explanation
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3.8 Ratings (774 Votes)
Formula
Given data:
Annual
Demand (D) (number of units)
7,700
Price
per unit (p)
$ 13.00
20%*p
Holding
cost per unit (Hc)
$ 2.60
Production set-up cost (Sc)
$ 165.00
Annual
production capacity (AC)
27,000
Number
of days (n)
250
Lead
time (Lt) (in days)
17
Formula
Calculations:
D/n
Usage
rate (U) (unit/day)
30.8
AC/n
Production (P) (unit/day)
108
Ans (a)
[(2D*Sc/Hc)^0.5]*[(P/(P-U)]
Minimum
cost production lot size (Q*)
1,169
Ans (b)
D/Q*
Number
of production runs per year
6.59
Ans (c)
Q*/U
Cycle
Time (in days)
37.96
Ans (d)
Q*/P
Length
of a production run (in days)
10.83
Ans (e)
(Q*/P)*(P-U)
Maximum
inventory (in number of units) (Imax)
836
Ans (f)
(Imax*Hc/2) + (D/Q*)*Sc
Total
annual cost
2,173
Ans (g)
P/Lt
Reorder
point
6
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