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ME 482 - Manufacturing Systems

WIP inventory example

Problem:  Inventory Holding Cost for WIP During Manufacturing

Solution:

The material cost, operation costs, and non-operation costs are from

Cpc = Cm + Cp = Cm + no ( Co Tp + Cno ) =  $100 + 20($25.00/hr x .8 hr + $10)

      = $100 + $600 = $700/pc

Next, determine the holding cost rate h = 20%+13%=33%. Expressing this as a weekly rate,

h = (33%)/(52 wk) = 0.6346 %/wk = 0.006346/wk. The holding cost/pc:

HCpc  = (Cm + Cp/2) h (MLT) = (100 + 600/2)(.006346)(15 wk) = $38.08/pc

This gives a total cost of

TCpc = Cm + Cp + HCpc = 700.00 + 38.08 = $738.08/pc

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