Question

1. A company has a production at a rate of 200 units per day. 80 units will be sold daily. The production will take place five days a week, 48 weeks a year. It usually takes a full day to get the machine ready for another production run, at a cost of $300. Inventory holding costs will be $10 a year. (calculate to2 decimal places)

a. What is the optional run size and lowest annual cost for carrying and setup?

b. What are the cycle time and run time for the optimal run quantity?

c. If the company wants to run another production for a new product between runs of this item, and needs a minimum of 10 days per cycle for the other work, will there be enough time?

Answer 1

1)	k	ordering/setup cost per production run	46800
	D	yearly demand rate	29200
	h	yearly holding cost per product	10
	P	yearly production rate	31200
	x	D/p	0.935897
		OOQ formula
	OOQ	(2*(80*365)*(300*2*48)/(10^(1/2))	12969
	OPTIONAL RUN SIZE		12969
	Lowest annual cost		20795.75
2)	Optimal cycle time		156
	Optimal run Quantity		83
3)	Yes, they can run that production also, because for the current item they have to produce only 83 qty in a day. The maximum capacity is 200
	Ie, 200-83 = 117 qty per day they can produce