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 used to produce the item will be available for the other work. The machine will produce the item at a rate of 200 units a day. Eighty units will be used daily in assembling the final product. 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 $300. Inventory unit holding cost will be $10 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 the production, at what rate will inventory buildup?
d) Suppose the manager wants to run another job that needs a minimum of 10 days per cycle between runs of this item.
1. What would the run size of the new product be needed to just accommodate the other job?
2. How much would that increase the total annual cost?
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