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8/9/2019 The Product 2
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College of Industrial Technology and Engineering
Visayas State University Isabel Campus
INAVS, Isabel, Leyte
MDC BOOKSHELF
In partial fulfillment
Of the requirement for the course
IEng 155: Production Planning and Control
Mark D. Colon
BSIE IV
Artvin B. Bolledo
Instructor
TABLE OF CONTENTS
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CHAPTER I: The Product
16
1.1Description of the Product1
1.2The Drawing (CAD) 2
A. Pictorial Drawing (Isometric)2
B. Orthographic Drawing3
C. Exploded Drawing 4
1.3Parts of the Product5
1.4Materials of the Product6
A. Direct Materials 6
B. Indirect Materials 6
CHAPTER II: Materials Requirement Planning7-11
2.1 Product Structure Tree
7
2.2 Materials Specification
8
2.2.1 Direct Materials
8
2.2.2 Indirect Materials
8
2.3 Parts List 8-9
2.4 Bill of Materials 9
2.4.1 Direct Materials
9-10
2.4.2 Indirect Materials
11
ii
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CHAPTER III: MRP II (Material Resource Planning)
12
3.1 Time Planned Product Structure Tree
12
3.2 Net Requirement Plan 12
3.2.1 Lot for Lot Sizing
12-13
3.2.2 Economic Order Quantity Technique
13-15
3.2.3 Part Period Balancing (PPB)
15-16
CHAPTER IV: Unit Cost and Unit Price
17-21
4.1 Standard Method
17
4.1.1 Direct Material Cost 17-18
4.1.2 Indirect Material Cost
18
4.1.3 Total Cost (Standard Method)
18
4.2 Detailed Method
19
4.2.1 Direct Material Cost 19-20
4.2.2 Indirect Material Cost
20
4.2.3 Total Cost (Detailed Method)
20
4.3 Unit Cost 21
CHAPTER V: Variance
22-23
iii
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Discussion on the difference between standard and detailed
method.
Discussion on the results of the net requirement plan.
iv
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CHAPTER I
I. THE PRODUCT
Product refers to anything that can be offered to market forattention, acquisition, use or consumption that might satisfy a want or need
and this could either be tangible or intangible. It includes physical objects,
services, persons, places, experiences, organization, information and ideas.
In this project, it would focus on the production of a tangible product.
The product that is to be produced is a bookshelf, furniture that is
basically made of wooden materials.
1.1 Description of the Product
It is a bookshelf which has five shelves and these are removable.
The spaces between the shelves also varies so that books or any other stuffs
will fit depends on their sizes. On the lower part of this bookshelf it has a
bigger space for some bigger objects, and then the space between the
shelves reduces as it goes upward. The shelves are removable and sliding so
that it is easier to assemble and disassemble. And it requires only a small
area in your houses for this bookshelf to be placed.
This bookshelf has many uses around the home. More than just books,
it display CDs and DVDs, collectibles, stuffed animals, and a dozen other
things we just cannot seem to live without. And also it can stand with some
heavy objects.
1
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1.2 The Drawing (CAD)
A. Pictorial Drawing (Isometric)
Shows the general appearance of the object.
Figure 1: Isometric View of Bookshelf
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B. Orthographic Drawing
A means of representing a three-dimensional (3D) object in two
dimensions (2D). It is a form of parallel projection, where the view
direction is orthogonal to the projection plane.
Figure 2: Orthographic Drawing
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C. Exploded Drawing
Separates the individual parts of the object. The parts are placed intheir relative positions with lines showing the direction in which theyare joined.
Figure 3: Exploded Drawing
4
1
2
2
2
5
2
3
6
1
4
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1.3 Parts of the Product
Parts
No.
NAME DRAWING DIMENSION MATERIAL
1 Side
x 9 52With the chamfer
of 2x2.Mahogany
wood
2 Shelf 1
x 9 - 34 Mahogany
wood
3 Shelf 2
x 9 - 34 Mahogany
wood
4 Backboard
x 7 - 34 Mahogany
wood
5 Kickboard
x 3 - 34 Mahogany
wood
Table 1.1 Parts of the product
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1.4 Materials of the Product
A. Direct Materials
Table 1.2 Materials of the Product (Direct Materials)Part
sNo.
Material Quantity
1 Mahogany wood 2 pcs.2 Mahogany wood 4 pcs.3 Mahogany wood 1pc.4 Mahogany wood 1pc.5 Mahogany wood 1pc.
B. Indirect Materials
1. Wood screw 8 pcs. of wood screw with a length of 2 inches.
2. Wood varnish (natural color) - 2 bottles or 750 ml.
6
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CHAPTER II
II. MATERIALS REQUIREMENT PLANNING
This part of the study presents the type and quality of materials to be
used in manufacturing the product as well as the direction and quantity of
parts that makeup the product.
2.1 Product Structure Tree
This presents graphical representation of the various parts of the
product in relation to how the product is to be assembled. This is shown in
the figure below.
Figure 2.1 Product Structure Tree
7
BOOKSHELF
SIDES (2)
SHELF 2KICKBOARD SHELF 1 (4) BACKBOAR
WOOD SCREW WOOD SCREW
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2.2 Materials Specification
The materials that will be used in the manufacture of the product are
presented below specifying the material of the parts, the dimension and
its type whether purchased or fabricated.
2.2.1 Direct Materials
Table 2.1
Direct Material, Specification
Parts no. Description Material Specification1 Side Mahogany wood 1x12x108
2 Shelf 1 Mahogany wood 1x12x108
3 Shelf 2 Mahogany wood 1x12x108
4 Backboard Mahogany wood 1x16x1085 Kickboard Mahogany wood 1x12x108
2.2.2 Indirect Materials
Use wood screw (#8 2 inches long) for the assembly of kickboard
and backboard to the sides.
Use wood varnish with natural color (750 ml) for the varnishing of
the bookshelf.
2.3 Parts List
Lists of parts of the furniture and its specific dimensions and the specific
quantity to be used for one unit and for 100 units production.
Table 2.2
Parts list
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Parts
no.Description Dimension
Qty of part
per unit
Qty of parts
used per
day1 Side .75x9.5x52"` 2 200
2 Shelf 1
.75x9.5x34.75
4 400
3 Shelf 2 .75x9x34.75 1 100
4 Backboard
.
75x7.75x34.25
1 100
5 Kickboard .75x3.5x34.25 1 100
6 Wood screw #8 - 2 long 8 800
7 Wood varnish 750 ml. 750 ml. 75,0000 ml
NOTE: Production is 100 units per day.
The following formula should be use to get the quantity of parts used
per day.
Quantity of parts = quantity of parts x proposed output
used per day per unit per day
Quantity of parts = 2 x 100 = 200
used per day
2.4 Bill of Materials
A listing of the components, the description, and the quantity of each
required to make one unit of a product.
2.4.1 Bill of Materials (Direct Materials)
Is the term used to describe the "parts list" of components needed to
complete a saleable end-item for the direct materials.
Table 2.3
Direct Bill of Materials
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Part
s
no.
Dimension of
parts
Dimension
of
materials
used
Waste
(in3)
Qty of
parts per
material
Qty of
materials per
day
1 .75x9.5x52" 1x12x108
558 2 100
2
.
75x9.5x34.75
1x12x10
8 553.22 3 134
3 .75x9x34.751x12x10
8 592.31 3 34
4
.
75x7.75x34.2
5
1x16x10
8512.53 6 17
5
.
75x3.5x34.25
1x12x10
8492.84 9 12
Note: all sample computation is applied to all parts in every table.
Sample Computation:
Quantity of parts = Dimension of materials used
per material Dimension of parts
Quantity of parts = .75x9.5x104" = 2
per material .75x9.5x52"
Quantity of materials = quantity of parts used per day
per day quantity of parts per materials
Quantity of materials = 200 = 100
per day 2
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Legends:
Blue,green,cyan and red indicates
wastes,with their corresponding
dimensions.
- .25x9.5x104
- .25x2x2 / 2
- 1x2.5x104
- 1x12x4
Color brown indicates the used
part.
- .75x9.5x104 w/ chamfer of
2x2
Figure 2.2 Presentation of Wastes andUsed Material
2.4.2 Bill of Materials (Indirect Materials)
Is the term used to describe the "parts list" of components needed tocomplete a saleable end-item for the indirect materials.
Table 2.4
Indirect- Bill of materials
Parts no. Dimension Qty of parts per
material
Qty of materials
per day6 #8- 2 long 8 pcs 800 pcs7 750 ml 750 ml 75,000 ml
Sample Computation:
Quantity of materials = quantity of parts x proposed output
per day per materials per day
Quantity of materials = 8 x 100 = 800
per day
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CHAPTER III
III. MRP II (Material Resource Planning)
A system that allows with MRP in place inventory data to be
augmented by other source variables; in this case MRP becomes
material resource planning.
3.1 Time Planned Product Structure Tree
Lead time it is the time upon ordering until delivery.
Assumptions:
Part/ Item Lead time (Days)
Bookshelf 1
Sides 2
Shelf 1 3
Shelf 2 2
Kickboard 1
Backboard 1
Figure 3.1 Time Planned Product
Structure Tree
3.2 Net Requirement Plan
3.2.1 Lot for Lot Sizing
Lot sizing technique that generates exactly what is require to meet theplan.
12
1 2 3 4 5 6 7
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Assumptions:
Demand = 100 units per week
Set-up cost = 2% of the total cost in standard method.
= .02 x Php 1,049.40 = Php 20.99 /orderHolding cost = 1% of the total cost in standard method
per week = .01 x Php 1,049.40 = Php 10.49
Holding cost = Php 10.49 = Php 1.50
per day 7 days/ week
Stock- out cost = Php 12.0
Table 3.1
Lot for Lot sizing for the Bookshelf
Lotsiz
e
Lead
tim
e
On
han
d
Safety
stoc
k
Allocated
LowLevelcod
e
ItemI
D
PERIOD ( DAYS)
1 2 3 4 5 6 7
Gross Requirements 25 30 10 15 20
Scheduled Receipt
Projected On Hand
Net Requirements 25 30 10 15 20
Planned Order
Receipts25 30 10 15 20
Planned Order
Released25 30 10 15 20
Cost Computation:
Total set-up cost = no. of orders x set-up cost
= 5 orders x Php 20.99/ order
= Php 104.95
Total holding cost = total inventory x holding cost per day
= 0 x Php 1.50 per unit/ per day
= Php 0.00
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Total cost = total set up cost + total holding cost
= Php 104.95 + Php 0.00
= Php 104.95
3.2.2 Economic Order Quantity Technique
Is preferable when relatively constant independent demand exists.
Assumptions:
Annual demand= 100 units/week x 48 week/year
= 4,800 units /year
Set-up cost = Php 20.99 per order
Holding cost per unit/year= Php 10.49 /unit/year x 48 week/year
= Php 503.52
Q = 2DS H
Q = 2(4,800)(20.99) 503.52
Q = 20 units
Table 3.2
EOQ for the Bookshelf
Lotsize
Lead
time
On
hand
Safety
stock
Allocated
LowLevelcode
ItemI
D
PERIOD ( DAYS)
1 2 3 4 5 6 7
Gross Requirements 25 30 10 15 20
Scheduled Receipt
Projected On Hand 10 15
Net Requirements 25 30 10 5 5
Planned Order
Receipts20 20 20 20 20
Planned Order
Released20 20 20 20 20
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Note:There is a stock out of 5 units at day 2 and 10 units at day 4, for the
total of 15 units stock out.
Cost Computation:
Total set-up cost =no. of orders x set-up cost
= 5 orders x Php 20.99/ order
= Php 104.95
Total holding cost = total inventory x holding cost per day
= 25 units x Php 1.50 per unit/ per day
= Php 37.5
Total stock-out cost = total no. of stock-out x stock out cost
= 15 units x Php 12.00
= Php 180.00
Total cost = total set-up cost + total holding cost + total stock-out cost
= Php 104.95 + Php 37.5 + Php 180.00
= Php 322.5
3.2.3 Part Period Balancing (PPB)
An inventory ordering technique that balances set-up and holding costs
by changing the lot size to reflect requirements of the next lot size in
the future.
Assumptions:
Set-up cost= Php 20.99
Holding cost= Php 1.50 per unit/day
Table 3.3
Gross requirements for PPB
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Periods
combine
d
Total
lot
size
Parts periodSet-up cost
(Php)
Holding
cost
(Php)
Total cost
(Php)
2 25 25x0=02,3 25 25x0+0x1=0
2,3,4 55 25x0+0x1+30x2=60
20.99 90 110.99
5 10 10x0=05,6 25 15x1=15 20.99 22.5 43.497 20 20x0=0 20.99 0 20.99
Total 175.47
Table 3.4PPB for Bookshelf
Lotsize
Lead
time
On
hand
Safety
stock
Allocated
LowLevelcode
ItemI
D
PERIOD ( DAYS)
1 2 3 4 5 6 7
Gross Requirements 25 30 10 15 20
Scheduled Receipt
Projected On Hand 30 30 15
Net Requirements 25 0 0 10 0 20
Planned Order
Receipts55 0 0 25 0 20
Planned Order
Released55 0 0 25 0 20
Cost Computation:
To prove that it is equal to the total cost in table 3.3
Total set-up cost =no. of orders x set-up cost
= 3 orders x Php 20.99 per order
= Php 62.97
Total holding cost = total inventory x holding cost per day
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= 75 units x Php 1.50
= Php 112.50
Total cost = total set-up cost + total holding cost
= Php 62.97 + Php 112.50
= Php 175.47
CHAPTER IV
IV Unit Cost and Unit Price
Cost of the unit that includes the direct materials and indirect materials
needed for every production of a certain product in a defined quantity of
production.
4.1 Standard Method
Describes a definitive procedure which produces a test result. It may involve
making a careful personal observation or conducting a highly technical
measurement.
4.1.1 Direct Material Cost
Cost of direct materials for every production of one unit.Table 4.1
Direct Material Cost (Standard Method)
Parts Materials
Cost ofmateri
al(Php)
Qty ofparts
per day
Qty ofmaterials perday
Cost ofmaterials perday
Qty ofpartperunit
Costof part
perunit
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(Php) (Php)
SideMahogany wood
315 200 100 31,500 2 315
Shelf 1Mahogany wood
315 400 134 42,210 4 422.1
Shelf 2
Mahoga
ny wood 315 100 34 10,710 1 107.1Backboa
rdMahogany wood
420 100 17 7,140 1 71.4
Kickboard
Mahogany wood
315 100 12 3,780 1 37.8
Total 95,340 953.40
Sample Computation:
Cost of materials = Cost of material x Quantity of materials
per day per day
Cost of materials = 315 x 200 = Php 31,500.00
Cost of part = Cost of materials per day x Quantity of part
per unit Quantity of parts per day per unit
Cost of part = 31,500 x 2 = Php 315.00per unit 200
4.1.2 Indirect Material Cost
Cost of indirect materials for every production of one unit.
Table 4.2
Indirect Material Cost (Standard Method)
Materials
Cost ofmaterial
(Php)
Qty ofmaterials
per day
Qty ofmaterialsused per
unit
Cost ofmaterialsper day(Php)
Cost ofmaterialper unit(Php)
Wood screw 2 800 8 1,600 16Wood
varnishP 40/ 375
ml75,000 ml 750 ml 8,000 80
Total 9,600 96
Sample Computation:
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Cost of materials = Cost of material x Quantity of materials per day per day
Cost of materials = 2 x 800 = Php 1,600.00
per day
Cost of part= Cost of material x Quantity of materials per unit used per unit
Cost of part = 2 x 8 = Php 16.00
4.1.3 Total Cost (Standard Method)
Total cost = Total unit material cost + Total unit material cost
of direct materials of indirect materialTotal cost = Php 953.40 + Php 96.00
Total cost = Php 1049.40
4.2 Detailed Method
Describes a specific and detailed procedure of obtaining a desired
quantitative result which produces a test results.
4.2.1 Direct Material Cost (Detailed Method)
Cost of direct materials for every production of unit, it is called detailed
because it includes the cost of waste.
Table 4.3
Direct Material Cost (Detailed Method)
PartsDimension of
part
Qtyof
part/material
Qty ofmaterial/day
Qty ofpart/u
nit
Cost ofmateri
al(Php)
Costof
part/unit
(Php)
Costof
waste/materi
al(Php)
Cost ofwaste/day (Php)
Side .75x9.5x52"` 2 100 2 315 315 55513,488.3
0
Shelf 1
.
75x9.5x34.75
3 134 4 315 420 553.22
18,018.0
7
Shelf 2 .75x9x34.75 3 34 1 315 105 592.31 4,894.78
Backboard
.
75x7.75x34.2
6 17 1 420 70 512.53 2,117.75
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5
Kickboard
.
75x3.5x34.25
9 12 1 315 35 492.84 1,437.45
Total 94539,956.3
5
Sample Computation:
Cost of part = Cost of material x Quantity of part per unit
Per unit Quantity of part per material
Cost of part = 315 x 2 = Php 315.00
Per unit 2
Cost of waste
Total quantity of = Quantity of waste x Quantity of material
waste (in3) per material (in3 ) per day
Total quantity of waste (in3 ) = 558 x 100 = 55,800 in3
Total quantity of = total quantity of waste (in3
)Material (waste) dimension of material (in3)
Total quantity of = 55,800 in3 = 43.97 in3
Material (waste) 1x12x108
Cost of waste = Total quantity of x Cost of material
Per part Material (waste)
Cost of waste = 43.97 in3 x Php 315 = Php 13,850.55
Per part
Cost of waste = Total cost of waste per day
Per unit Proposed output per day
Cost of waste = Php 40,318.60 = Php 403.19
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Per unit 100
4.2.2 Indirect Material Cost (Detailed Method)
Table 4.4
Indirect Material Cost (Detailed Method)
Materials
Cost ofmaterial
(Php)
Qty ofmaterial
s perday
Qty ofmaterials used
per unit
Cost ofmaterial
s perday
(Php)
Cost ofmaterialper unit(Php)
Costof
waste(Php)
Woodscrew
2 800 8 1,600 160
Woodvarnish
P 40/ 375ml
75,000 ml 750 ml 8,000 800
Total 9,600 96 0
Note: Same computation as of standard method because there is no waste.
4.2.3 Total Cost (Detailed Method)
Unit Material Cost = Cost of part per unit + Cost of indirect materialper unit
+ Cost of waste per unit
Unit Material Cost = Php 1,945.00 + Php 403.19
Unit Material Cost = Php 1,444.19
4.3 Unit Cost
The cost incurred by the company to produce, store and sell one
unit of a particular product. Unit costs include unit material cost, unit
labor cost and unit overhead cost involved in the production.
Unit Cost (standard method)= unit material cost +unit labor cost +unit overhead cost= Php 1,049.4 + 0 + 0= Php 1,049.4
Unit Cost (detailed method)= unit material cost +unit labor cost +unit overhead cost
= Php 1,444.9 + 0 + 0= Php 1,444.9
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CHAPTER V
V. Variance
Computation for the variance:
Variance = detailed method cost standard method cost x 100
detailed method
Variance = Php 1,444.9 Php 1,049.4 x 100 % = 27.37 %
Php 1,444.9
Discussion on the difference between standard and detailed
method.
The only difference of the standard and detailed method is the
cost of waste. Because in the standard method the cost of waste is
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not added into the total cost while in the detailed method the cost of
waste is included. Its the reason why the total cost in the detailed
method is greater than of the standard method. The larger the
amount of waste the greater its cost and it can be seen during the
computation of the variance. Larger variance indicates that there is
also a large amount of waste. The variance shows the difference
between the two methods.
Discussion on the results of the net requirements plan.
Lot for lot is a lot sizing technique that generates exactly what is
required to meet the plan. This means that the quantity of units that
is going to be ordered is just the same of how many units are
required. In this case there is no stock-out and inventories which
indicates that there is also no stock-out cost and holding cost to be
added in the computation of the total cost. So the only cost to be
computed is the set-up cost and since there are only 5 orders, we
generate a cost of only Php 104.95.
In the EOQ technique, it generates a larger cost than of the lot
for lot, because in the EOQ there is an additional cost for the stock out
and also for the inventories. So all in all it has a total cost of Php
322.45. EOQ will only be preferable if there is a relatively independent
demand.
During the use of the PPB technique, it also generates a lesser
cost but it is greater than the cost in the lot for lot technique. Even
though it has only a few number of orders but it has a large amount of
holding cost, which makes the total cost larger up to Php 175.47.
So from the following results we can make a conclusion that for
this case, the best lot sizing technique to be used is the lot for lot,
because the cost to be incurred has been minimized, only up to Php
104.95.
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