Enfield has its vehicle assembly plant in Tiruvottiyur, Chennai and its
engine assembly plant in Oragadam near Chennai. Engines are transported between the
two plants using trucks, with each trip costing Rs. 2000. vehicle plant assembles and
sells 250 motorcycles every day. Each engine costs Rs. 25000, and MCL incurs a holding
cost of 24 % per year.
a. How many engines should MCL load onto each truck? what is the optimal order
b. What is the cycle inventory of engines at MCL? If demand, and thus production, for
their motorcycle grows, but all other input data remain unchanged, would you expect
cycle inventory of engines at MCL to increase or decrease?
a. Optimal order quantity is:
b. An inventory cycle, also called inventory turnover, or turns, is a measure of how many times during a given period a company sells an volume of products equal to the volume of supplies it keeps on hand.
Inventory cycle = 1/0.24 = 4.17 units.
If demand, and thus production, for their motorcycle grows, but all other input data remain unchanged, then we would expect cycle inventory of engines at MCL to decrease.