Explain the optimal prodcution lot size

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Reference no: EM13117540

Gold Company manufactures a circuit that is used to produce television sets. Gold has agreed to supply the circuit to Pana TV, Inc. for the next three years. Pana has ordered 4,000 circuits per year during the contract period. Gold's annual production capacity is 8,000 circuits. Holding cost is $10 per unit per year, and setup cost per production run is estimated at $2,000. Given this information, determine:

a. The optimal prodcution lot size
b. The length of the production phase.
c. Average inventory level
d. The optimal total annual inventory cost

Illustrat the inventory level graphically.

Reference no: EM13117540

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