Upon hearing that Ross White (see Problems 627 and 628) is considering producing the brackets inhouse, the vendor has notified Ross that the purchase price would drop from $15 per bracket to $ 14.50 per bracket if Ross will purchase the brackets in lots of 1,000. Lead times, however, would increase to 3 days for this larger quantity.
(a) What is the total annual inventory cost plus purchase cost if Ross buys the brackets in lots of 1,000 at $ 14.50 each?
(b) If Ross does buy in lots of 1,000 brackets, what is the new ROP?
(c) Given the options of purchasing the brackets at $ 15 each, producing them inhouse at $ 14.80, and taking advantage of the discount, what is your recommendation to Ross White?
In Problems 627, Ross White’s machine shop uses 2,500 brackets during the course of a year, and this usage is relatively constant throughout the year. These brackets are purchased from a supplier 100 miles away for $ 15 each, and the lead time is 2 days. The holding cost per bracket per year is $ 1.50 (or 10% of the unit cost) and the ordering cost per order is $ 18.75. There are 250 working days per year.
In Problems 628, Ross White (see Problem 627) wants to reconsider his decision of buying the brackets and is considering making the brackets inhouse. He has determined that setup costs would be $ 25 in machinist time and lost production time, and 50 brackets could be produced in a day once the machine has been set up. Ross estimates that the cost (including labor t
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