Question

Wilson Publishing Company produces books for the retail market. Demand for a current book is expected to occur at a constant annual rate of 7,400 copies. The cost of one copy of the book is $11.50. The holding cost is based on an 18% annual rate, and production setup costs are $150 per setup. The equipment with which the book is produced has an annual production volume of 25,000 copies. Wilson has 250 working days per year, and the lead time for a production run is 15 days. Use the production lot size model to compute the following values. (Round your answers to two decimal places.)

(a)

Minimum cost production lot size

(b)

Number of production runs per year

(c)

Cycle time

(d)

Length of a production run (in days)

days

(e)

Maximum inventory

(f)

Total annual cost (in $)

$

(g)

Reorder point

Suppose that Westside Auto, a manufacturer of automobile generators with D = 13,000 units per year, C_h = (2.00) (0.20) = $0.40, and C_o = $25, decided to operate with a backorder inventory policy. Backorder costs are estimated to be $5 per unit per year. Identify the following. (Assume 250 working days per year. Round your answers to two decimal places.)

(a)

Minimum cost order quantity

(b)

Maximum number of backorders

(c)

Maximum inventory

(d)

Cycle time (in days)

days

(e)

Total annual cost (in $)

$

Answer 1