QUESTION 2

Ricardo is currently working on a lot sizing decision in his shop. The net requirements for a material from an MRP schedule are:

Week	1	2	3	4	5	6	7	8
Net requirements	600	800	1200	1650	2100	1350	700	800

• Annual Demand = 60,000 over a 50-week-per-year (average of 1,200 units per week)
• It costs $3,000 to set up the machines
• It costs $2.00 when one unit of product is kept in inventory for one week
• No beginning inventory

a) Develop a lot-sizing schedule for lot-for-lot (LFL)

Week	1	2	3	4	5	6	7	8
Net requirements	600	800	1200	1650	2100	1350	700	800
Beginning Inventory
Production Lot
Ending Inventory
Average Inventory

Setup Costs =

Inventory Holding Costs =

Total Costs =

b)Develop a lot-sizing schedule for Economic Order Quantity (EOQ)

EOQ =

Week	1	2	3	4	5	6	7	8
Net requirements	600	800	1200	1650	2100	1350	700	800
Beginning Inventory
Production Lot
Ending Inventory
Average Inventory

Setup Costs =

Inventory Holding Costs =

Total Costs =

c)Develop a lot-sizing schedule for Least Total Cost (a.k.a. Part Period Balancing (PPB))

Target Economic Part Period (EPP) =

Periods Combined Lot Size EPP

Week	1	2	3	4	5	6	7	8
Net requirements	600	800	1200	1650	2100	1350	700	800
Beginning Inventory
Production Lot
Ending Inventory
Average Inventory

Setup Costs =

Inventory Holding Costs =

Total Costs =