Consider the product structure tree shown below:
Assume that the company using this product structure tree has 5 items each at the 0 level, 10 items each at the 1 level and 20 items each at the 2 level. How many units of A, B, and E will the company need to acquire in order to ship an order of 20 X's?
What will be an ideal response?
Answer: Working from top to bottom, we need 20 X's and have 5 on hand, so we need to come up with 15 more X's.
15 X's require 30 D's and 45 C's and we have 10 units of both D and C, so our net requirements are 20 D's and 35 C's.
The 20 D's need 40 A's and 60 E's.
The 35 C's need 70 B's and 105 E's and 105 A's
Our total gross requirements are 145 A's and 70 B's and 165 E's, but we have 20 each on hand.
Our net requirements at level 2 are 125 A's; 50 B's; and 145 E's.
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