A part is produced in lots of 1,000 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.
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How many units of the part are held, on average, in cycle inventory? What is the dollar value of this inventory?
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How many units of the part are held, on average, in pipeline inventory? What is the dollar value of this 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" role="presentation" style="display: inline-block; line-height: 0; font-size: 18.72px; word-wrap: normal; word-spacing: normal; white-space: nowrap; float: none; direction: ltr; max-width: none; max-height: none; min-width: 0px; min-height: 0px; padding-top: 1px; padding-bottom: 1px; position: relative;">$80$80, or $50+$60/2" role="presentation" style="display: inline-block; line-height: 0; font-size: 18.72px; word-wrap: normal; word-spacing: normal; white-space: nowrap; float: none; direction: ltr; max-width: none; max-height: none; min-width: 0px; min-height: 0px; padding-top: 1px; padding-bottom: 1px; position: relative;">$50+$60/2$50+$60/2).