Consider an industrial situation in which it is necessary to set up an assembly line.
Suppose that each time the line is set up a cost c is incurred. Assume c is in addition to the cost of producing any item and is independent of the amount produced. Suggest submodels for the production rate. Now assume a constant production rate k and a constant demand rate r. What assumptions are implied by the model in Figure 13.6?
Next assume a storage cost of s (in dollars per unit per day) and compute the optimal length of the production run P^∗ to minimize the costs. List all of your assumptions. How sensitive is the average daily cost to the optimal length of the production run?

Figure 13.6

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Quantity Slope is k-r Slope is -r Time in days T Cengage Learning