A Company That Makes Construction Equipment Is Exploring Different Lot

Essay

A company that makes construction equipment is exploring different lot sizing approaches to its master requirement planning (MRP) schedule: lot-for-lot (LFL), fixed-order quantity (FOQ) using the EOQ, and periodic-order quantity (POQ). It costs $100 to set up the production line to produce hydraulic jacks, and the carrying cost per unit per week is $1. Annual demand is expected to be 1550 jacks. For planning purposes, the company uses a 50-week work year and disregards the effects of initial inventory and safety stock. The net requirements for hydraulic jacks for the next six weeks are:
$\begin{array}{|l|l|l|l|l|l|l|}\hline \text { Week } & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Net Requirements } & 35 & 30 & 40 & 10 & 40 & 30 \\\hline\end{array}$
a. Using a LFL approach, what is the lot size in week 3?
b. What is the total cost for the LFL method?
c. What is the fixed-order quantity (FOQ) using the EOQ approach?
d. What is the beginning inventory for week 5 using the FOQ approach?
e. What is the total cost using the FOQ method?
f. What is the periodic-order quantity?
g. What is the ending inventory for week 4 using the POQ method?
h. What is the total cost using the POQ approach?