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BoyzGonWild BoyzGonWild
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6 years ago
Holstein Computing manufactures an inexpensive audio card (Audio Max) for assembly into several models of its microcomputers. The annual demand for this part is 100,000 units.
 
  The annual inventory carrying cost is 5 per unit and the cost of preparing an order and making production setup for the order is 750. The company operates 250 days per year. The machine used to manufacture this part has a production rate of 2000 units per day.
 
  (a) Calculate the optimum lot size.
  (b) How many lots are produced in a year?
  (c) What is the average inventory for Audio Max?
  (d) What is the annual holding and setup cost for Audio Max?
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#1
6 years ago
(a) Qp = = = 6123.7 or 6124 units.

(b) There are approximately N = = = 16.33 cycles per year.

(c) The maximum inventory is Q = 6123.7 = 4899 units; average inventory is 4899 / 2 = 2449.5 units.

(d) Annual inventory management costs are 16.33(750 ) + 2449.5(5 ) = 12,247.50 + 12,247.50 = 24,495.
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