Question: A company produces a part that is used in its production process. The company produces the part at a rate of 300 units per day.

A company produces a part that is used in its production process. The company produces the part at a rate of 300 units per day. The daily demand for the product is 180 units. The annual demand for the part is 54,000 units and occurs consistently over the 300 days that the company operates yearly. The company incurs a setup cost of $300 each time the item is produced. The cost of carrying the item in inventory is estimated to be 25% of the item’s $100 cost. How many units should the company produce each production run to minimize its inventory-associated costs?

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