Answer to Question #102553 in Math for Laila

Question

A machine manufactures spare parts at the rate of 20, 000 per month. A second machine uses those spare parts at the rate 50 00 per month and remainder put into stock. It cost ₦100, 000 to set up the machine the company establish their stock hold costs 20% per annum of the average stock value each parts costs ₦250 to make. Required What batch size should be produced on the first machine and what frequency.

Answer 1

Solution

Since the stock balance is determined by the cost of production, it is necessary to consider the production and consumption of parts in a value context.

The cost of turning on the first machine is 100,000 monetary units, therefore, it is necessary to determine the difference between the cost of output and the cost of installing the machine.

Since the second machine uses 5000 parts every month from the parts manufactured by the first machine, and the rest is sent to the warehouse, and the balance in the warehouse cannot be less than 20% of the amount needed for the second machine, this is necessary to include the first machine every 4 months.

Below is a table with the calculations according to the described algorithm.

The first machine need to work at 1, 4, 8 and 12 month. Size should must be 20000. Production of a smaller batch is not profitable.