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Valles Global Industries is assessing the cost of manufacturing parts for worldwide use. One particular part...

Valles Global Industries is assessing the cost of manufacturing parts for worldwide use. One particular part is used approximately 2,000,000 per year. It is produced in batches of 2,000,000. Recently, you have been put in charge of determining a new strategy and look at batch sizes of 50,000. You determine that material cost is $1.25, labor cost $1.50 and distribution cost $0.25 per part. An interest rate of 22% has been established to represent opportunity and storage costs. Order cost is $100. a) What is the cost of the first strategy? b) What is the optimal EOQ? c) Suppose your plant can make a maximum of 75,000 parts a week. What is the optimal size production run?

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