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MBA 731 WK 3 Problems A part is produced in lots of 1000 units. It is assembled from 2 components worth $50 total.
MBA 731 WK 3 Problems
A part is produced in lots of 1000 units. It is assembled from 2 components worth $50 total. The value added in production (for labor and variable overhead) is $60 per unit, bringing total costs per completed unit to $110. The average lead time for the part is 6 weeks and annual demand is 3,800 units, based on 50 business weeks per year.
a) How many units of the part are held, on average , in cycle line inventory? What is the dollar value of this inventory?
b) How many units of the part are held, on average , in pipeline inventory? (Hint: Assume that the typical part in pipeline inventory is 50 percent completed. Thus, half the labor and variable overhead cost has been added, bringing the unit cost to $80 or $50 + $60/2).
