# Exercise 1 Economic Order Quantity

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Exercise 1 Economic Order Quantity

BCO214-Production Management

Exercise 1: Economic Order Quantity. (35 points)

One of the Toyota plants must decide how many of a particular type to order for manufacturing automobiles.

The company plans to produce 300,000 cars in the next year. All cars planned for production use the same headlights (2 units per car); therefore, demand for the headlights for the next year is known to be 600,000 units. The purchasing agent wants to know how many headlights to buy at one time. Historically, headlights have been received half a day (lead time) after they were ordered. It costs € 50 to order lights, and the holding-cost fraction used by the auto company is 22 % per year. The headlights cost € 25 each.

• Compute the Economic Order Quantity.
• What is the number of orders per year?
• What is the frequency of orders? Assume the company works 365 days a year.
• What is the
• The company works with a Safety Stock of 0.75 days. What is the level of this stock?
• What is the Average Stock?
• What is the total Holding Cost?
• What is the total Ordering Cost?
• What is the total Cost of Stock Management?
• Draw the evolution of stock in time (the stock chart).

Material Requirement Planning (MRP). (35 points)

Exercise 3: Understand quality management and efficiency control and how to measure. (30 points)

3.1) “Quality begins with the design of a product in accordance with the customer specification further it involved the established” Discuss why and give examples.

3.2) Why is necessary Inspection in production?

100% inspection or sampling inspection. When do we use each and what are the reasons for it?

3.3) Why do we define tools for measuring and controlling quality. Give the list of basic tools in Quality Management, explain, and give examples.

3.4) What are the most usual “wastes” in a production system? How Lean Management can reduce or eliminate these wastes and improve the efficiency in a manufacturing process?

Students are required to use the Harvard Referencing System. The report needs to be uploaded onto Turnitin on Moodle. The assignment hand-in will be created by the course tutor.

Formalities:

• Word document.
• Wordcount: 2500 words.
• Font: Arial 12,5 pts.
• Text alignment: Justified.
• The in-text References and the Bibliography have to be in Harvard’s citation style.

Submission:

• Week 12: Via Moodle (Turnitin).
• Deadline: 8th January 2023 at 23:59 CEST.