Quantity should be used to minimize the total annual costs

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Reference no: EM131764542

Wayne enterprises is about to begin the production of a new product. The manager of the department that produces one of the components wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 300 units a day. Eighty units will be used daily in assembling the final product. Assembly will take place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run at a cost of $400. The inventory holding costs will be $15 a year.

a. What run quantity should be used to minimize the total annual costs?

b. How many days does it take to produce the optimal run quantity?

c. What is the average amount of inventory (in units/day)?

d. If themanager wants to run another job between runs of this item and needs a minimum of 10 days per cycle for the other work, will there be enough time?

e. Given the answer to part d above, the manager wants to explore options that will allow the other job to be performed using this equipment. Name three options the manager could consider.

f. Suppose the manager decides to increase the run size of the new product. How many additional units would be needed to just accommodate the other job? How much will that increase the total cost?

Reference no: EM131764542

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