Posted by **Jasmine** on Tuesday, November 24, 2009 at 9:11am.

Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant

in Pennsylvania. Engines are transported between the two plants using trucks, with each trip

costing $1,000. The motorcycle plant assembles and sells 300 motorcycles each day. Each

engine costs $500, and Harley incurs a holding cost of 20 percent per year.

a. How many engines should Harley load onto each truck? What is the cycle inventory of

engines at Harley?

b. As part of its initiative to implement just-in-time (JIT) manufacturing at the motorcycle

assembly plant, Harley has reduced the number of engines loaded on each truck to 100.

If each truck trip still costs $1,000, how does this decision impact annual inventory costs

at Harley? What should the cost of each truck be if a load of 100 engines is optimal for

Harley?

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