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XYZ Inc makes its own transmission parts, which are then put into its motorbikes. While the manufacturing process is continuous, the transmission are intermittent flow. The annual demand of the transmission is 60,000 and daily demand is 400 units. XYZ Inc is capable of producing 1,200 transmission daily. It costs XYZ $100 to setup a production run and 30 cents to store one transmission per year.
a) To minimize cost, how large should each batch of subassemblies be?
b) Approximately how many days are required to produce a batch?
c) How long is a complete cycle?
d) What is the average inventory for this problem?
e) What is the total annual inventory cost (holding plus setup) of the optimal behavior in this problem?
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