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The small boatyard White Kayaks built 156156 epoxy kayaks last year
The small boatyard White Kayaks built 156156 epoxy kayaks last year. Each of these requires 12 kg12 kg of epoxy, purchased in 6 kg6 kg barrels at $170$170 each, with a freight cost of $18$18 per shipment plus $1$1 per kgkg. The annual carrying cost is estimated to be 20 %20 % of the value.
a) If the purchase policy is to buy 2020 barrels each time, how much time can be spent on administrative work if the order quantity should be considered optimal? The boat-builder charges $25/hour$25/hour.
b) If time spent is 3030 minutes, what would be the optimal order quantity?
Expert Solution
We have given the following information
- Small boatyard white kayaks built 156156 epoxy kayaks last year.
- Annual carrying cost is estimated to be 20%20% of value.
- Each of the required 12kg12kg epoxy purchased in 6kg6kg barrels at 170170 dollar each, freight cost is 1818 dollar per shipment plus 1dollarperkg1dollarperkg.
Part-a
If the purchase policy to buy 2020 barrel each time.
Demand =2×156=312=2×156=312
Cost =170dollar=170dollar
Inventory carrying cost =0.2×170=34dollar=0.2×170=34dollar
Hours of Administrative 17025=6.817025=6.8
Hence, the required time 6.8hours6.8hours
Part-b
If the time spent is 30minute30minute
Demand (D)=312(D)=312
Cost (c)=170dollar(c)=170dollar
Inventory carrying cost =0.2×170=34dollar=0.2×170=34dollar
Hours of admin (A)=0.50(A)=0.50
Cost of admin (H)=25(H)=25
Trip cost (k)=138(k)=138
Order (Q)=√2×KD(IC+AH)(Q)=2×KD(IC+AH)
=√2×138×31234+0.5×25=43.03≈43units=2×138×31234+0.5×25=43.03≈43units
Hence, the new optional order quantity is 43units43units.
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