Homework Answers
Daily demand of the carpet d = 28000/350 = 80
Daily production capability p =400
a. Optimum production run quantity = [ 2x demand per annum x set up cost / cost of holding a unit ( 1-d/p)]1/2
= [ 2 x28000 x800 / 5 x ( 1-0.2)]1/2
= 3346.64 =3347
b. Min total inventory cost per year = (1/2) x avg quantity per set up x cost of holding a unit per year x ( 1-d/p)
= 1/2 x3347 x 5 x0.8 = 6694
c.Optimum length of a production run = order size / daily production = 3347/400 = 8.36 days.
d. Number of production runs per year
annual demand / optimum production quantity = 28000/3347 =8.36
e
Quantities consumed during production run = 80x8.36 = 668.8
Remaining quantity = 3447-669 =2678
Number of days for which the quantity will be sufficient = 2678/80 = 33.47 days
which will be the cycle time between the runs.
f. Max inventory level will be at the time when production runs just stops = 2678 ( as calculated in e)
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