3. A farm tractor manufacturing company called HNC in Detroit, Michigan is using a special environment...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3. A farm tractor manufacturing company called HNC in Detroit, Michigan is using a special environment friendly engine in its brand new tractor model. The tractor sales for this model show a fairly steady demand of 5,600 tractors per year. HNC purchases these engines from an engine producer in Detroit area at a price of $4,000. This supplier sends the engines in batches of 100 immediately when HNC orders (i.e., zero lead time). It costs HNC $10,000 to place an order. Inventory holding costs are based on an annual interest rate of 20% and HNC works 50 weeks in a year. (a) Find the current cycle time between the orders (i.e., length of the reorder interval). (b) Suppose there is a positive lead-time for delivery of the engines from supplier. Calculate the reorder point R if the promised lead time is one week. (c) HNC realized that ordering batches of 100 is not the optimal policy. Find (a) the optimal number of engines to order (i.e., the EOQ value), and (b) the optimal reorder interval. (d) How much more does it cost HNC to use Q = 100 instead of the EOQ that you calculated in part (c)? (e) Suppose that the engine supplier is offering a quantity discount applied to all units with the following schedule. If the ordering quantity, Q. is less than 200, then the unit price is $4,000. If a quantity between 200 and 399 is purchased, then the unit price is $3,800. And finally, if 400 or more units are ordered, the unit price is equal to $3,400. What is the optimal order quantity in this case? (f) Now, suppose that HNC decided to consider the option of producing the engines in-house. The production capacity allows HNC to produce 11,200 engines per year. The cost of starting a production run is $4,000 but each engine cost them half the price of outsourcing (namely $2,000 per engine). Should HNC make the engines in-house, or buy them from the supplier? Substantiate your answer by comparing the optimal annual costs of each option. (Hint: To answer this question, make use of the Economic Production Lotsizing (EPL) model) 3. A farm tractor manufacturing company called HNC in Detroit, Michigan is using a special environment friendly engine in its brand new tractor model. The tractor sales for this model show a fairly steady demand of 5,600 tractors per year. HNC purchases these engines from an engine producer in Detroit area at a price of $4,000. This supplier sends the engines in batches of 100 immediately when HNC orders (i.e., zero lead time). It costs HNC $10,000 to place an order. Inventory holding costs are based on an annual interest rate of 20% and HNC works 50 weeks in a year. (a) Find the current cycle time between the orders (i.e., length of the reorder interval). (b) Suppose there is a positive lead-time for delivery of the engines from supplier. Calculate the reorder point R if the promised lead time is one week. (c) HNC realized that ordering batches of 100 is not the optimal policy. Find (a) the optimal number of engines to order (i.e., the EOQ value), and (b) the optimal reorder interval. (d) How much more does it cost HNC to use Q = 100 instead of the EOQ that you calculated in part (c)? (e) Suppose that the engine supplier is offering a quantity discount applied to all units with the following schedule. If the ordering quantity, Q. is less than 200, then the unit price is $4,000. If a quantity between 200 and 399 is purchased, then the unit price is $3,800. And finally, if 400 or more units are ordered, the unit price is equal to $3,400. What is the optimal order quantity in this case? (f) Now, suppose that HNC decided to consider the option of producing the engines in-house. The production capacity allows HNC to produce 11,200 engines per year. The cost of starting a production run is $4,000 but each engine cost them half the price of outsourcing (namely $2,000 per engine). Should HNC make the engines in-house, or buy them from the supplier? Substantiate your answer by comparing the optimal annual costs of each option. (Hint: To answer this question, make use of the Economic Production Lotsizing (EPL) model)
Expert Answer:
Answer rating: 100% (QA)
HNC Tractor Engine Inventory Problem Givens Annual demand D 5600 tractors Engine price per unit P 40... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these general management questions
-
La compaa XYZ REQUIERE REALIZAR UNA INVERSION QUE LE PERMITA OBTENER UN INGRESO DE $20.000.000 EN 5 AOS . LA EMPRESA CUANTA CON CUATRO OPCIONES DE INVERSION CON DIFERENTES TASAS DE RENTABILIDAD. EL...
-
el inters trimestral que pagan los valores negociables es 10 f 10 la vida til de la maquinaria es de 8 trimestres v 8 encima de 120 mil unidades el costo de mano deobra por unidad es $ 33 f v 22 el...
-
For this final discussion board, please reflect back on your accounting courses and answer the following questions: 1. Which course in the accounting program did you find to be the most difficult? 2....
-
Suppose that you jounce up and down while weighing yourself on a bathroom scale. Which varies: the upward support force or the force of gravity on you? Why is your weight reading best shown when you...
-
Which of the following areas of culture presents the greatest challenge for internal audit functions who want to become trusted advisors? a. Receiving approval to include consulting services in the...
-
With reference to the previous exercise, assume that production has a normal distribution and obtain a \(99 \%\) confidence interval for the true mean production of the pilot process. Data From...
-
In 2013, Grishell Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the companys...
-
The number of active Facebook users hit 2.414 billion at the end of June 2019 and 2.498 billion at the end of December 2019. With in months since the start of 2019, let f(r) be the number of active...
-
Cheapest Car Rental rents cars at the Chicago airport. The car rental market consists of two segments: the short-term segment, which rents for an average of 0.5 week, and the medium-term segment,...
-
Supplier relationships are becoming more and more prevalent as a result of the market's supply and demand uncertainty. In order to successfully satisfy client demand whenever it emerges, businesses...
-
How the application of the below principle will contribute to the project's success? Writ an essay "Effectively engage with stakeholders"
-
In what model do managers use delegating in a low supportive and low directive manner?
-
1. (a) By the use of deposit of 20,000 Kshs and 10% required reserve, explain the process of credit creation by commercial bank in Kenya (10 marks). (b) Differentiate between open cheque and crossed...
-
Some economists argue that early child care generates an external benefit to society. Consider the following demand and supply le graph for early childhood education. Price ($ per month) $1,300...
-
The principle of optimizing risk responses does not refer to which one of the following: Assessing what individual and overall risks might impact the project. Understanding the organization's risk...
-
Luz Azul, LLC is a merchandiser of blue light blocking glasses. The company began 2019 with $10,000 in cash and reported net income of $6,700 on its 2019 income statement. During the year a loss of...
-
This problem continues the Draper Consulting, Inc., situation from Problem 12-45 of Chapter 12. In October, Draper has the following transactions related to its common shares: Oct 1 Draper...
-
Russell (age 50) and Linda (age 45) Long have brought you the following information regarding their income and expenses for the current year. Russell owns and operates a landscaping business called...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Bea Jones (age 32) moved from Texas to Florida in December 2011. She lives at 654 Ocean Way, Gulfport, FL 33707. Bea's Social Security number is 466-78-7359 and she is single. Her earnings and income...
-
As the marketing manager for Independent Packaging Pty Ltd, you have asked the accountant what it costs to make the Container2000 model because you want to set a price for the container. A similar...
-
Incomplete information concerning the financial performance of two manufacturing companies is presented below. Required Determine the answers to (a) to(f) for the two companies. Work in process,...
-
Smart Manufacturing Systems Pty Ltd uses a periodic inventory system and closes its accounts on 30 June each year. The companys closing entries made on 30 June 2025 were as shown below. Required (a)...
Study smarter with the SolutionInn App