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    Power Plant California Ex 1 Ans

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    Abhi
    The power plant consumes 100,000 pounds of coal and 1,000 pounds of MRO material daily. Safety inventory costs for coal using train transport would be $7,500 versus $75,000 for MRO. Transporting coal via full train loads would cost $78,214, making the total $85,714. Transporting MRO using 60,000 pound trucks would be $15,816.7, making the total $35,816.7. Therefore, train transport is recommended for coal and truck transport is recommended for MRO based on minimizing total costs.

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    Power Plant California Ex 1 Ans

    Uploaded by

    Abhi
    1K views3 pages
    The power plant consumes 100,000 pounds of coal and 1,000 pounds of MRO material daily. Safety inventory costs for coal using train transport would be $7,500 versus $75,000 for MRO. Transporting coal via full train loads would cost $78,214, making the total $85,714. Transporting MRO using 60,000 pound trucks would be $15,816.7, making the total $35,816.7. Therefore, train transport is recommended for coal and truck transport is recommended for MRO based on minimizing total costs.

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    The power plant consumes 100,000 pounds of coal and 1,000 pounds of MRO material daily. Safety inventory costs for coal using train transport would be $7,500 versus $75,000 for MRO. Transporting coal via full train loads would cost $78,214, making the total $85,714. Transporting MRO using 60,000 pound trucks would be $15,816.7, making the total $35,816.7. Therefore, train transport is recommended for coal and truck transport is recommended for MRO based on minimizing total costs.

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    1K views3 pages

    Power Plant California Ex 1 Ans

    Uploaded by

    Abhi
    The power plant consumes 100,000 pounds of coal and 1,000 pounds of MRO material daily. Safety inventory costs for coal using train transport would be $7,500 versus $75,000 for MRO. Transporting coal via full train loads would cost $78,214, making the total $85,714. Transporting MRO using 60,000 pound trucks would be $15,816.7, making the total $35,816.7. Therefore, train transport is recommended for coal and truck transport is recommended for MRO based on minimizing total costs.

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    The passage discusses transportation options and costs for coal and MRO material being transported from a power plant. It analyzes the costs of different transportation modes to determine the most cost effective option for each material.

    Train is recommended for transporting coal because it has the minimum total cost of $85,714.

    60000 pound truck is recommended for transporting MRO material because it has the minimum total cost of $35,816.7

    A power plant in California uses coal at the rate of 100,000 pounds each day.

    It also
    uses MRO material at the rate of 1,000 pounds each day. The coal comes from
    Wyomung and the MRO material comes from Chicago. Coal costs $0.01 per pound,
    whereas MRO material costs $10 per pound, on average. Holding costs at the power
    plant are 25 percent. Transportation choices available are as follows:
    Train
    Lead Time = 15 days
    Carload (100,000 pounds) at $400 per carload
    Full train (70 cars) at $15,000 per train
    Truck
    Lead time = 4 days
    Minimum cost = $100
    Upto 10,000 pounds at $0.08 per pound
    Between 10,000 and 20,000 pounds at $0.07 per pound for entire load
    Between 25,000 and 40,000 pounds at $0.06 per pound for entire load
    Small TL (40,000 pounds) for $2,000
    Large TL (60,000 pounds) for $2,600
    Safety inventory of coal and MRO materials is kept at twice the consumption during
    the lead time of supply. What mode of transport do you recommend for each of the
    two products? Why?

    Solution

    Train

    Safety inventory for coal = 100,000*2*15 = 3,000,000

    Safety inventory for MRO = 1000*2*15 = 30,000

    Total holding cost

    Coal = (3,000,000*0.01)*.25 = $7,500

    MRO = (30000*10)* .25 = $75,000

    Let ‘x’ car load be used

    Total Cost of transportation for Coal = (365)*400 = 146,000


    If the whole train is used, Cost for coal= (365/70)*15000 = 78214.

    Total Cost of transportation for MRO = (365*1000)/(100,000)*400 = 1460

    Coal

    Optimal cost = $7,500+$78,214 = $85,714

    MRO

    Optimal cost = $75,000+$1,460 = $76,460

    Truck

    Safety inventory for coal = 100,000*2*4 = 800,000

    Safety inventory for MRO = 1000*2*4 = 8,000

    Total holding cost

    Coal = (800,000*0.01)*.25 = $2,000

    MRO = (8000*10)* .25 = $20,000

    Option Coal MRO


    Upto 10,000 pounds = =
    (100,000*365/10,000)*10000*0.08 (1,000*365/10,000)*10000*0.08
    = 2,920,000 = 29,200
    10000 to 20000 pounds = =
    (100,000*365/20,000)*20000*0.07 (1,000*365/10,000)*10000*0.07
    = 2,555,000 = 25,550
    25000 to 400000 = =
    pounds (100,000*365/20,000)*20000*0.06 (1,000*365/10,000)*10000*0.06
    = 2,190,000 = 21,900
    40000 pounds = (100,000*365/40,000) *2000 = (1,000*365/40,000) *2000 =
    =1,825,000 18250
    60000 pounds = (100,000*365/60,000) *2600 = (1,000*365/60,000)
    =1,581,667 *2600=15816.7

    So, minimum cost for coal in this option is using 60000 pound truck

    So, minimum cost for MRO in this option is using 60000 pound truck

    So,

    Coal

    Optimal cost = $2,000+$1581667 = $1,583,667

    MRO

    Optimal cost = $20,000+$15,816.7 = $35,816.7

    So, based on the comparison,

    The total cost is minimum for coal while using full train load, cost = $85,714

    The total cost is minimum for MRO while using 60000 pound truck, cost = $35,816.7

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