New Design Component Commonality (Single Source)

Fliboard uses continuous review policy

Lot size is calculated using economic order quantity (EOQ)

Now Fliboard decides to use Samsung battery for both hoverboards so that demands of batteries can be aggregated

Target CSL

Samsung battery: 0.99

Replenishment lead time

Samsung battery: 4 weeks

Fixed order cost

Samsung battery: $1,000 per order

Inventory holding cost of battery

Samsung battery: $60

Calculate following values for replenishing battery

(3-1) Lot size (Q) For Samsung battery

(3-2) Safety inventory (ss) For Samsung battery

(3-3) Annual ordering cost (AOC) For Samsung battery

(3-4) Annual holding cost (AHC) For Samsung battery

(3-5) Annual material cost including battery (AMC) For Proboard For Babyboard (cost increases due to using Samsung battery)

Calculate total profit of the current operation (two hoverboards)

Assume annual ordering cost and holding cost of all components except batteries are negligible

(3-6) Total profit Profit = Revenue Total Cost

Where total cost is sum of:

Annual material cost

Annual ordering cost

Annual holding cost