The Epic Company manufactures Part No. RPN2322 for use in continuous assembly elsewhere in the firm. When parts are being run, deliveries are made to the assembly area; otherwise, the assembly department draws parts from inventory. The data below are for RPN2322.
Production rate = 600 pieces per day
Number needed by Assembly = 270 pieces per day
Inventory Holding Cost = $5.00 per unit per year
Set-up Cost = $250 per batch produced
Company operates only 340 days per year
Use this information to answer the following questions. You must show your work to receive credit on the assignment.
a. What is the economic Production Order Quantity (POQ) for this item?
(Round number to nearest whole number)
b. To what level will inventory build for this item (Imax)?
c. How many days is RPN2322 in production during each production cycle?
d. How long does inventory last once the production of RPN2322 stops?
e. What is the total number of days between orders?
f. During each production cycle, how many units are used directly by the assembly department without incurring inventory charges?
g. What is the total annual inventory cost for this item?