Case Study Report 1 THREE JAYS CORPORATION Complete Solution

2013 S - The Marketplace to Buy and Sell your Study Material Case Study Report 1: THREE JAYS CORPORATION 1. Using the data in case Exhibit 4 and the 2012 annual demand, calculate the EOQ and ROP quantities for the five SKUs scheduled to be produced in the last week of June. How do these amounts compare with those calculated in 2011? Compare the increases in EOQs with the increases in annual demand. (2.5 points) The 2012 Annual Demand is given as Exhibit 5: Monthly Sales Data Label Type Ja Fe n b Mar Apr Ma y June July Aug Sept Oc Year t Nov Dec Total 3Js Strawberry Jam ,869 2013 Marran Markets 2,868 Raspberry Jelly 2012 2013 Kerry's Marts 2012 Peach Jam ,006 2,856 ,970 Dom's Food Stores 592 Blueberry Jam 99 ,211 526 AAA Grocers Apple/Mint Jelly 69 65 146 88 71 68 832 480 The EOQ and ROP quantities for the five SKU’s based on 2012 annual demand is given as Strawberry Jam Raspberry Jam Peach Jam Total Annual Set up Deman cost (S) d (D) 63.7 3869 63.7 3006 63.7 1970 Carryin g Cost (i) % 9% 9% 9% Unit Cost (C) 28.34 30.52 26.86 EOQ (cases) 440 373 322 ROP (cases) 223 173 114 Page 1 of 12 Downloaded by: Distribution of this document is illegal Want to earn $103 per month? S - The Marketplace to Buy and Sell your Study Material Blueberry Jam Apple/Mint Jelly 63.7 1211 63.7 832 9% 29.01 243 70 9% 26.32 212 48 As Demand increased from 2011 to 2012, the EOQ’s also increased Deman d (2010) 2993 2335 1492 886 625 Deman d (2012) 3869 3006 1970 1211 832 Increase in Demand 29.27% 28.74% 32.04% 36.68% 33.12% EOQ EOQ (2010) (2012) 387 440 329 373 280 322 208 243 183 212 Increase in EOQ 13.70% 13.37% 15.00% 16.83% 15.85% So, if Annual Demand doubles, the EOQ will increase by sqrt(2) 2. Brodie is uncertain if the costs presented in case Exhibit 2 are appropriate for determining the EOQs. What changes would you recommend, and why? Should the cost of the three idle part-time workers be included when the production line is down? Using the 2012 annual demand, and your recommendations, recalculate the EOQs for the five SKUs. (2.5 points) In set up costs, the cost of part time workers should also be included, as they are idle at that time. Assuming the salary of each part time worker to be half that of full time worker So, Total salary of 3 part time workers, during idle time of 1 hour = 3*0.5*23.5 = $35.25 So, new set up cost = $63.7 + $35.25 = $98.95 In carrying cost, storage cost was considered as 0%, which should be more because, there is always an opportunity cost of storing one inventory over another. So, considering storage cost as 2%, new carrying cost = 6% + 2% + 3% = 11% Some of the basic assumptions of EOQ are debated • The demand is not uniform throughout the year, which may lead to stock outs • The order of new batch takes time and is not done instantly. For this case, the ROP should be adjusted to include the lead time to place order Page 2 of 12 Downloaded by: Distribution of this document is illegal Want to earn $103 per month?