Question

A company periodically produces a part that is a basic component of an assembled product. Each time the part is run, a fixed cost of $123 is incurred. The cost to hold one unit for a week is estimated to be $1.74. For the demand (net requirements) shown above, determine the quantity and timing of production runs using the part-period method. Produce units in week Produce units in week Produce units in week

Answer 1

The part-period method is used to determine the quantity and timing of production runs. It involves considering the fixed cost and the cost to hold one unit for a week. The calculation involves dividing the demand by the economic order quantity to optimize production.

Step-by-step explanation:

The part-period method is a way to determine the quantity and timing of production runs.

In this method, we consider the fixed cost and the cost to hold one unit for a week to optimize production.

To calculate the quantity and timing of production runs, we divide the demand (net requirements) by the economic order quantity (EOQ), which is the quantity that minimizes the sum of ordering cost and holding cost.

In this case, the fixed cost is $123 and the cost to hold one unit for a week is $1.74.