MidTerm Exam B&L Inc. Case Study PLEASE FOLLOW ALL INSTRUCTIONS!! CASE STUDY RUBRIC AND B&L INC CASE STUDY ATTACHED! THIS IS MY MIDTERM (VERY IMPORTANT) Read the B&L Inc. Case study locat

Case: B&L Inc. There is a solid opportunity here for Brian Wilson, assuming that the numbers from Mike Carr and Mayes are accurate. However, this does not mean that B&L should outsource the bracket, at least not right away. After checking the numbers with Mike Carr and M ayes, Brian might want to dig into process improvement opportunities before committing to outsourcing. For example, the case indicates that B&L is not getting full benefit from the eight station burn table machine. The threat of moving production out to a supplier might create some interest in the plant to changing the process to reduce costs. Either way, Brian might want to satisfy manufacturing that he gave them a fair chance to look at the process and its costs before pulling the business. First, we wil l take a look at the cost data for the outrigger bracket. The cas e indicates that B&L produces 45 trailers per year , which suggests that it needs 9 00 brackets annually, assuming 20 brackets per trailer. B&L estimated its bracket costs at $150.10 each, for a total annual cost of $1 35,090 . It is certainly worthwhile for Brian Wilson and Alison Beals to spend some time on this project. Exhibit 1 in the case provides the data from the controller, Mike Carr, and the detail from the quote from Mayes. Note the in consistencies between the prices from Mayes and B&L’s costs, which raise the issue of the accuracy of the prices/costs. It suggests that either B&L does not have a good handle on its costs or Mayes has made some mistakes in their bid. It would be worthwhil e to follow -up on this issue with the controller, Mike Carr, and with Mayes. Students should be prepared to show how they intend to reconcile the inconsistencies. It would be useful to get more information, such as material and direct labor costs. Annual Manufacturing Cost : Annua l Demand = 45 trailers . Total usage per part = 45 trailers * 20 units/part = 9 00. 900 sets of five pa rts per year *$150.10 = $135,090 Total Purchasing -Related Costs: We will assume that Brian Wilson will order in EOQ amounts and wi ll place a joint order with Mayes for all five parts. Note: Using the EOQ will most likely over -estimate annual purchasing related costs because demand is not level throughout the year. D = 9 00 sets of the five parts per year S = $75 per order P = $108.20 per set of five parts H = .20 * $108.20 = $21.64 per set of five parts per year Calculate the EOQ: 0= √2 = √2(900 )(75 ) 21 .64 = 78 .98 = 79 Determine total cost when placing orders of Q = 79 sets of the five parts: Total Cost = Annual Holding Cost + Ann ual Ordering Cost + Annual Purchase Cost = 2 + + = 79 2 (21 .64 )+ 900 79 (75 )+ (900 )(108 .20 )= $854.78 + $854.43 + $97,380 = $99,089.21 Annual savings from purchasing Q = 79 sets of five parts = $ 135,090 – $99,089.21 = $36,001 . Alternatively, Brian Wilson, materials manager at B&L, may want to place orders in multiples of 20 given that each trailer requires 20 sets of the five parts. Determine total cost when placing orders of Q = 80 sets of the five parts: = 2 + + = 80 2 (21 .64 )+ 900 80 (75 )+ (900 )(108 .20 )= $865.60 + $ 843.75 + $97,380 = $99,089.35 . Annual savings from purchasing in Q = 80 sets of five parts = $ 135,090.00 - $99,089.35 = $36,000.65 . Recommendation?