 # Frankfurt Electronics produces a component internally using a state-of-the-art technology. The operations manager wants to determine the optimal lot size to ensure that the total annual inventory cost is minimized. The daily production rate for the component is 500 units, annual demand is 36,000 units, setup cost is \$150 per setup, and the annual holding rate is 30 percent. The

Frankfurt Electronics produces a component internally using a state-of-the-art technology. The operations manager wants to determine the optimal lot size to ensure that the total annual inventory cost is minimized. The daily production rate for the component is 500 units, annual demand is 36,000 units, setup cost is \$150 per setup, and the annual holding rate is 30 percent. The manager estimates that the total cost of a finished component is \$80. If we assume that the plant operates year-round, and there are 360 days per year, what are the
(a) Daily demand
(b) Optimal lot size
(c) Highest inventory
(d) Annual product cost
(e) Annual holding cost
(f) Annual setup cost
(g) Total annual inventory cost
(h) Length of a production period
(i) Length of each inventory cycle
(j) Rate of inventory buildup during the production cycle
(k) The number of inventory cycles per year?
Plot the movement of the inventory during one production cycle using time on the horizontal axis and on-hand inventory on the vertical axis.

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