Part 1A part is produced in lots of 1,4001,400 units. It is assembled from 2 components worth $3030 total. The value added in production (for labor and variable overhead) is $3030 per unit, bringing total costs per completed unit to $6060. The average lead time for the part is 88 weeks and annual demand is 4,0004,000 units, based on 50 business weeks per year.Part 2a. How many units of the part are held, on average, in cycle inventory? [input]700700 units. (Enter your response as an integer.)Part 3What is the dollar value of this inventory? $[input]enter your response here . (Enter your response as an integer.)

Question

Part 1A part is produced in lots of 1,4001,400 units. It is assembled from 2 components worth ​$3030 total. The value added in production​ (for labor and variable​ overhead) is ​$3030 per​ unit, bringing total costs per completed unit to ​$6060. The average lead time for the part is 88 weeks and annual demand is 4,0004,000 ​units, based on 50 business weeks per year.Part 2a. How many units of the part are​ held, on​ average, in cycle​ inventory? [input]700700 units. ​(Enter your response as an​ integer.)Part 3What is the dollar value of this​ inventory? ​$[input]enter your response here . ​(Enter your response as an​ integer.)

BlackTom AI · Accepted Answer

We start by identifying what is being asked in Part 2a and Part 3.
First, note the lot size given: 1,400 units per production run. In cycle inventory calculations, cycle stock is typically half of the lot size, since inventory fluctuates from full lot when production starts to zero just before the next batch begins. Therefore, average cycle inventory = 1,400 / 2 = 700 units.
Next, to determine the dollar value of this inventory (Part 3), we multiply the average cycle inventory by the cost per unit.
The problem states that the total cost per completed unit is $60 (consisting of $30 for materials and $30 for labor/variable overhead, since the two components total $60 per unit). So the dollar value of the average cycle inventory is 700 units × $60 per unit = $42,000.
A helpful cross-check is to ensure the chosen numbers align with the given lot size and unit cost: cycle stock is always half the order quantity in a simple EOQ-like scenario, producing 700 units in this case, and the value uses the unit cost of $60, yielding $42,000 in value.
If any step seems unclear, recall that cycle inventory represents the portion of stock tied up in the normal ordering/production cycle, and its value follows directly from multiplying that quantity by the cost per unit.

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