A company is about to begin production of a new product. The manager of the department...

A company is about to begin production of a new product. The manager of the department that will produce one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units will be used daily in assembling the final product. Assembly will take place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at a cost of $300. Inventory holding costs will be $10 a year.

a. What run quantity should be used to minimize total annual costs?

b. How many days does it take to produce the optimal run quantity?

c. What is the average amount of inventory?

Solutions

Expert Solution

Answers:
a. What run quantity should be used to minimize total annual costs?	1414.21	Units
b. How many days does it take to produce the optimal run quantity?	7.07	7 Days
c. What is the average amount of inventory?	424.26	units

Formulas:

keosha answered 1 month ago

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