Minco Inc. is a small manufacturer of fused magnesia and silica.3 Minco's continuous improvement efforts led to a capacity and production planning software. To prepare for the use of software, a spreadsheet was first used to determine the capacity requirements for the main equipment (the fusion furnaces) and the production schedule for the main products. A major product had the following forecast and committed orders (all in thousand pounds):

The initial inventory was 119,000 pounds and the minimum stock at the end of each week was to be 83,000 pounds.

a. Calculate the economic production quantity (EPQ) if the annual demand is 3,000,000 pounds, setup cost is $350 per setup, inventory holding cost rate is 20 percent per year, unit cost is $2 per pound, demand rate is 500 pounds per hour, and production rate is 1,000 pounds per hour.

b. If EPQ = 100,000 pounds, prepare a production schedule for this product for the next seven weeks.

c. Determine the available-to-promise inventory for the next seven weeks.

Transcribed Image Text:

January February Week 3 4 1 2 3 4 Forecast 56 56 56 66 66 66 66 Committed 44 O 18 order