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


9-10


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


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.

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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.

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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.


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


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


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


= 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


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


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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


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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