Find the inventory model that best fits the situation

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Reference no: EM133561181

Problem

Nicolas has a business in which he manufactures LED lamps that he then sells wholesale. The plant has three machines that he uses to produce the lamps, each with a production capacity of 500 lamps per month at a cost of $2.50 each. The annual demand for these lamps is 5,000 units. A cost of $100 is incurred to start the production line. The warehouse manager estimates that the cost of holding inventory is about $0.50 per unit per year. If the plant is operating at 80% of its capacity. Find:

I. The Inventory Model that best fits this situation

II. The optimal production lot, the maximum inventory, the supply time, the stockout time, the number of production runs per year, the cycle time and the annual cost of the optimal policy

III. If the start-up time is 30 days. Calculate reorder point

IV. If the warehouse has a maximum storage capacity of 800 units. Indicate if the previously calculated production lot size changes.

For all calculations assume that 1 year = 355 days

Reference no: EM133561181

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