A Company Assembles Microcomputers for Sale to Computer Stores A Using the LFL Method, What Is the Size of Are

question 88

Essay

A company assembles microcomputers for sale to computer stores. They are trying to decide which lot sizing approach to use for developing their MRP schedules: lot-for-lot (LFL), fixed-order quantity (FOQ) using the EOQ approach, or periodic-order quantity (POQ). The setup cost is $1000 per order, the inventory-carrying cost is $2.50 per week per unit, and the annual demand for the computers is 10,000 units. The company is using a 50-week work year and disregarding the effects of initial inventory and safety stock. The estimated net requirements ?? the microcomputers for the next six weeks are:
$\begin{array}{|l|l|l|l|l|l|l|}\hline \text { Week } & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Net Requirements } & 150 & 200 & 50 & 300 & 250 & 100 \\\hline\end{array}$
a. Using the LFL method, what is the size of the production lot for Week 2?
b. What is the total cost using the LFL method?
c. What is the economic order quantity (EOQ)?
d. What is the ending inventory in Week 3 using the EOQ approach?
e. What is the total cost using the EOQ method?
f. What is the periodic-order quantity (POQ)?
g. What is the beginning inventory in Week 4 using the POQ approach?
h. What is the total cost using the POQ method?

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Definitions:

Standard Error

The standard deviation of the sampling distribution of a statistic, typically the mean, indicating the variability of sampling estimates.

SSE

Sum of Squared Errors; a measure used in statistics to describe the total deviation of data points from a fitted value, reflecting the discrepancy between observed and predicted values.

Standard Error

A measure of the accuracy of predictions made with a statistical model, specifically it quantifies the variability of the sampling distribution of a statistic.

Square Root

A mathematical function that provides the original value when it is multiplied by itself.