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1,Montegut Manufacturing produces a product for which the annual demand is 10,000 units. Production averages 100 units per day. There are 250 working days per year. Holding costs are $2 per unit per year, and setup cost is $200.
What is the optimal production quantity?
What is the maximum level of inventory?
What are the total annual holding and setup costs?
2. A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car. Paper sales are normally distributed, with a mean of 100 and standard deviation of 10. He sells papers for $0.60 and pays $0.30 for them. Unsold papers are sold to a neighborhood doctor for $0.08.
What is the optimal service level?
How many papers should he order each day?
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