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25 November, 16:49

RevGilla manufactures a motorcycle part in lots of 155 units. The raw materials cost for the part is $150, and the value added in manufacturing 1 unit from its components is $300, for a total cost per completed unit of $450. The lead time to make the part is 3 weeks, and the annual demand is 4,200 units. Assume 50 working weeks per year. How many units of the part are held, on average, as cycle inventory? (enter response rounded to whole number).

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  1. 25 November, 18:05
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    77.5 units

    Explanation:

    Given that,

    Lot size = 155 units

    Raw material cost = $150

    value added in manufacturing per unit = $300

    Total cost per unit = $450

    Lead time = 30 weeks

    Annual demand = 4,200 units

    Average cycle inventory = Lot size : 2

    = 155 : 2

    = 77.5 units

    Value = Average cycle inventory * cost per unit

    = 77.5 * $450

    = $34,875
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