Question

(Operations Management) The annual demand of an appliance company is 8000 units. The production capacity is 200 units per day. Each time production starts, it costs the company $120 to move materials into place, reset the assembly line, and clean the equipment. The holding cost of a refrigerator is $50 per year. The current production plan calls for 400 refrigerators to be produced in each production run. Assume 250 working days per year.
a) Compute the daily demand of this product.
b) If the company were to continue to produce 400 units each time production starts, how many days would production continue?
c) How many production runs per year would be required? What would the annual cost be?
d) how many refrigerators would be in the inventory when production stops? What would be the average inventory level in this case?
e) If the company produced 400 refrigerators at a time, what would the total annual set up cost and holding cost be?

Answer 1