What run quantity should be used to total annual cost

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Reference no: EM13761099

A company is about to begin production of a new product. The manager of the department that will produce one of the components for the product wants to know how often the machine will be available for other work. The machine will produce the item at a rate of 180 units a day. Annual demand for the product is 25,000. 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 $320. Inventory holding costs will be $12 a year.

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

b. What is the length of a production run in days?

c. During production, at what rate will inventory buildup?

d. Plot the inventory cycle. Show the maximum and average inventory levels, production run size, production length, cycle length, and re-order point.

e. If the manager wants to run another job between runs of this item, and needs a minimum of 7 days per cycle for the other work, will there be enough time?

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

g. 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 annual cost?

Reference no: EM13761099

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