Question

Consider the following requirements for a certain product.

Period	1	2	3	4	5	6	7	8
Gross requirements	0	200	200	500	0	400	0	400

Beginning inventory = 500 units

Setup cost = $500 per setup

Lead time = 1 week

Holding cost = $3 per unit per week

a. Develop the lot-for-lot MRP table.

b. Calculate the total relevant costs.

Answer:

Period		1	2	3	4	5	6	7	8
Gross requirements		0	200	200	500	0	400	0	400
Projected on hand	500
Net Requirement
Planned Reciept
Planned Order

Setup Cost=

Holding Cost=

Total Cost =

Kindly, Explain the methods used in details !

Answer 1

Item   Period	1	2	3	4	5	6	7	8
Gross requirements	0	200	200	500	0	400	0	400
Scheduled receipts	0	0	0	0	0	0	0	0
Projected on hand 500	500	300	100	0	0	0	0	0
Net requirements	0	0	0	400	0	400	0	400
Planned order receipts	0	0	0	400	0	400	0	400
Planned order releases	0	0	400	0	400	0	400	0

Avg inventory ( ending inventory) = 900

Inventory cost = 900*3 =2700

Number of set ups = 3

Set up cost = 3*500=1500

Total cost = 4200