2. A contractor must supply 10,000 bearings a day to an automobile manufacturer. When he starts...

 

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2. A contractor must supply 10,000 bearings a day to an automobile manufacturer. When he starts a production run, he can produce 25,000 bearings per day. The cost of holding one bearing in stock for one year (365 days) is 0.02, and the setup cost for a production run is 18. Answer the following questions: a) What is the optimal batch quantity? b) How frequently should production runs be made? (4 marks) (2 marks) c) How long should the production continue in each run? (2 marks) d) What is the maximum inventory level under the optimal policy? (2 marks) 2. A contractor must supply 10,000 bearings a day to an automobile manufacturer. When he starts a production run, he can produce 25,000 bearings per day. The cost of holding one bearing in stock for one year (365 days) is 0.02, and the setup cost for a production run is 18. Answer the following questions: a) What is the optimal batch quantity? b) How frequently should production runs be made? (4 marks) (2 marks) c) How long should the production continue in each run? (2 marks) d) What is the maximum inventory level under the optimal policy? (2 marks)