Question

2. The Garble Corporation produces brass rings for its assembly of Fancy Garbles. The firm operates 220 days a year and uses the rings at a steady rate of 50 per day. Rings can be produced at a rate of 200 per day. Annual storage cost is $2 per ring, and the machine setup cost is $70 per run.

a) determine the economic run quantity

b) how many runs per year will there be?

c) what is the average inventory on hand?

Answer 1

Answers are in BOLD

	Daily production rate, p		200
	Daily demand/usage rate, d		50
	operation days, o=		220
	Annual demand, D=	d*o	11000
	cost per order, S		$70.00
	holding cost per year, H=		$2.00
Answer a	Economic run quantity, Q=	SQRT(2*S*D/(H*(1-d/p)))	1013.25
	length of production run in days, t	t= Q/p	5
Answer b	#Runs per year =	Annual demand/ordered quantity, D/Q	10.86
	Maximum inventory level, pt - dt	Total produced during the product run- total used during the production run	759.93
Answer c	Average inventory level	Maximum inventory level/2	379.97