The XYZ Company has an assembly plant in Cincinnati and its parts plant in Indianapolis. Parts are transported from Indianapolis to Cincinnati using trucks. Each shipment costs $100
The Cincinnati plant assembles and sells 300 finished products each day and operates 50 weeks a year. Part #456 costs $50 and XYZ Company incurs a holding cost of 20 percent per year. How many of part #456 should XYZ Company put in each shipment? What is the cycle inventory of part #456 at XYZ Company?
What will be an ideal response?
Answer:
Q =
=
= 1224.745 ≈ 1225
Average cycle inventory = Q*/2
= 1225/2
= 612.5
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