Question:
A company is engaged in manufacturing two products X and Y. Product X uses one unit of component P and two units of component Q. Product Y uses two units of component P, one unit of component Q and two units of component R. Component R which is assembled in the factory uses one unit of component Q.
Components P and Q are purchased from the market. The company has prepared the following forecast of sales and inventory for the next year:
|
Product X
|
Product Y
|
|
Sales (in units)
|
80,000
|
1,50,000
|
|
At the end of the year
|
10,000
|
20,000
|
|
At the beginning of the year
|
30,000
|
50,000
|
The production of both the products and the assembling of the component R will be spread out uniformly throughout the year. The company at present orders its inventory of P and Q in quantities equivalent to 3 months' production. The company has compiled the following data related to two components:
|
P
|
Q
|
|
Price per unit (Rs.)
|
20
|
8
|
|
Order Placing Cost per order (Rs.)
|
1,500
|
1,500
|
|
Carrying Cost per annum
|
20%
|
20%
|
Required:
1. Prepare a Budget of production and requirements of components during next year.
2. Suggest the optimal order quantity of components P and Q.