Calculate the economic production quantity
number of parts to a major bicycle manufacturer. One of the parts manufactured
on the press has an annual demand of 50,000 units. The part is produced at a
rate of 600 units per day. There are 250 working days throughout a year. The
annual inventory carrying cost is estimated to be $25 per part. Each setup is
done by two employees together and takes 66 minutes to complete. Each employee
is paid $15/hr. The company makes a profit of $341/hr. when the press is
working.
a) Using the information provided, show that the setup cost
is $408.1/setup.
b) Calculate the economic production quantity.
c) Calculate
the annual minimum total cost.
d) How many
working days does each production run take?
e) What is
the level of maximum inventory?
f) What is
the cycle time (i.e. the time between two setups)
g) If the
company wants to reduce the economic production quantity in line with
just-in-time practices, what do you suggest in order to achieve this goal?
Justify your response.
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