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Rolf Steps is the production manager for a local manufacturing firm. This company produces staplers and other items. The annual demand for a particular stapler is 1,600 units. The holding cost is $2 per unit per year. The cost of setting up the production line is $25. There are 200 working days per year. The production rate for this product is 80 per day. If Rolf decided to produce 200 units each time he started production of the stapler, what would his maximum inventory level be

Respuesta :

Answer:

His maximum inventory level would be 180 units

Explanation:

According to the given data we have the following:

daily demand rate , d=1,600/200=8 units;

daily production rate p=80 units;

C0=25 dollar

Cc=2 dollar

Therefore, Qopt=√2*25*1,600/(2(1-8/80))

Qopt=210.82

But here Rolf decide to produce 200 units each time he started production, hence fix Q=200

Therefore, Maximum inventory level=200*(1-8/80)=200*0.9

Maximum inventory level=180 units

His maximum inventory level would be 180 units

anthougo

Rolf Steps' maximum inventory level would be 126 units.

Data and Calculations:

Annual demand = 1,600 units

Holding costs = $2 per unit

Setup cost = $200 ($25 x 8)

Working days per year = 200 days

Production rate per day = 80 units

Number of setup = 8 setups (1,600/200)

Re-order quantity = square root of (2 x 1,600 x $200)/$2

= 566 units

Maximum Level = Re-order level + Re-order quantity – (Minimum usage × Minimum lead time)

= 200 + 566 - (80 x 8)

= 766 - 640

= 126 units

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