25 May Question 5. Define a Master Production Schedule (MPS) and explain how it differs from a f
Question
5. Define a Master Production Schedule (MPS) and explain how it differs from a final assembly schedule.
6. Define Material Requirements Planning (MRP) and how it can benefit an organization.
7. Explain a bill of materials (BOM), bill of labor (BOL), and bill of resources (BOR) relate.
8. What are the components of an MRP record?
9. Explain the three lot-sizing methods, and under what circumstances each work best:
| a. | Lot-for-Lot (LFL) |
| b. | Fixed Order Quantity (FOQ) |
| c. | Periodic Order Quantity (POQ) |
10. What is capacity requirements planning (CRP)?
PROBLEM
1. A company currently has no items in inventory. The demand for the next four months is 200, 400, 250 and 350 units. Determine the level production rate if a level strategy is selected with the goal of ending Period 4 with 100 units in inventory.
2. A company currently has no items in inventory. The demand for the next four months is 200, 400, 250 and 350 units. Assuming a level production rate of 250 units per month, determine the month in which a backorder will materialize.
3. The Academic Company mixes and bottles a high-energy beverage in various container types and sizes for college students. The aggregate forecast for the next four quarters (1 year) in thousands of gallons is as follows:
| Quarter | Forecast Demand
per 1,000 Gallons |
| 1 | 400 |
| 2 | 700 |
| 3 | 850 |
| 4 | 650 |
| Total | 2,600 |
Academic’s management makes the following assumptions:
| · | Each employee works 550 standard hours of regular time each quarter. |
| · | On average, it takes 27 hours to produce and package 1 unit (1,000 gallons). |
| · | Regular-time labor costs $6.00/hour; overtime labor costs $9.00/hour. |
| · | Inventory holding cost is approximately $4.50/unit (1,000 gallons) per quarter based upon the ending inventory per quarter. |
| · | Because of extremely hot weather, there is no beginning inventory available to start Quarter 1. |
| · | Management wants a constant work force (no hiring or firing). |
| · | Managers have also decided to always round up the number of employees needed to the next whole integer, i.e., 37.2 yields 38 employees. |
a. Determine how many employees would be needed to meet the peak required in Quarter 3.
b. Determine the annual inventory holding cost if Academic decides to use a level production rate of 650 units per quarter.
c. Using a level schedule of 650 units per quarter, what will be the annual employee costs?
d. Using a level schedule of 650 units per quarter, what will be the annual employee costs if only 30 employees are available and overtime is used?
e. If management decides on a chase demand strategy, with production last quarter of 600 units and a rate change cost of $3.00/1000 gallons, determine the total rate change cost.
4. A paint company has the following aggregate demand requirements and cost data for the upcoming year by quarter.
| Quarter | Forecast Demand (units) |
| 1 | 1,200 |
| 2 | 1,500 |
| 3 | 1,900 |
| 4 | 1,000 |
| Total | 5,600 |
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