A Company Can Produce a Part It Uses in an Assembly

question 136

Essay

A company can produce a part it uses in an assembly operation at the rate of 50 an hour.The company operates eight hours a day,300 days a year.Daily usage of the part is 300 parts.The company uses the part every day.The run size is 6,000 parts.The annual holding cost is $2 per unit,and setup cost is $100.
(i)How many runs per year will there be?
(ii)While production is occurring,how many parts per day are being added to inventory?
(iii)Assuming that production begins when there are no parts on hand,what is the maximum number of parts in inventory?
(iv)The machine is dedicated to this product.Every so often,preventive maintenance,which requires six working days,must be performed on it.Does this interrupt production cycles,or is there enough time between cycles to perform the maintenance? Explain.

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Definitions:

Diminishing Returns

The principle stating that as more of a variable input is added to a fixed input, the additional output produced from each new unit of input eventually decreases.

Rocking Chairs

A type of furniture designed with curved bands attached to the bottom, allowing it to rock back and forth.

Production Function

A mathematical model or equation that describes the maximum output of a firm, industry, or entire economy for a given set of inputs.

Labor Input

The amount of work effort, measured in hours or workforce size, used in the production of goods and services.