Louisiana Specialty Foods can produce its famous meat pies at a rate of 1650 cases of 48 pies each per day. The firm distributes the pies to regional stores and restaurants at a steady rate of 250 cases per day
The cost of setup, cleanup, idle time in transition from other products to pies, etc., is $320. Annual holding costs are $11.50 per case. Assume 250 days per year.
(a) Determine the optimum production run (batch size).
(b) Determine the number of production runs per year.
(c) Determine maximum inventory.
(d) Determine total inventory-related (setup and carrying) costs per year (rounded to the nearest dollar).
(a) Q*p = = = 2024.7 or 2025 cases.
(b) There will be 62,500 / 2024.7 = 30.87 runs per year.
(c) The maximum inventory level is Q = 2024.7 = 1717.9 units.
(d) Total inventory management costs are
TC = ($320 ) + ($11.50 ) = $9878 + $9878 + $19,756.
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