Average inventory level for optimum production quantity

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Reference no: EM132123687

Ventura Lumber Mill (not a real company) in Salvador, Brazil, processes 9,000 logs annually and operates 300 days during a year. Ventura’s supplier delivers orders to the lumber mill at the rate of 50 logs per day. The cost to Ventura for placing an order to the supplier is US$1,400 per order, and the cost of carrying inventory of logs is US$20 per log per year:

a. What is the economic production quantity (EPQ)?

b. What is the average inventory level for this optimum production quantity?

c. How many production setups would there be in a year?

Reference no: EM132123687

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