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Question
A local company produces a programmable EPROM (erasable programmable read-only memory) for several industrial clients. They have experienced a relatively flat demand of 2500 units per year for the product. The EPROM is produced at a rate of 10000 units per year. Company has a steady rate of daily production. The accounting department has estimated that it costs $50 to initiate a production run, each unit costs the company $2 to manufacture, and the cost of holding is base on a 30% annual interest rate. Company working 250 working days in a year. Determine the optimal size of a production run, the length of each production run, and the total cost of production. How many inventory is being sold during production time? What is the cycle time? What is the number of production runs during a year? What is the maximum level of on-hand inventory of the EPROMs?
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