2 Solution to problems Mark: (8 + 4 + 3) + (6 + 6 + 2 + 1) = 30

1. Suppose the demand of a product produced by a production firm is 6000 per year (1 year = 312 days) and it occurs at a constant rate. The production rate of the product per year is 10000. The set up cost of setting a machine for the production of the product is 800 Taka. The selling price per unit of the product is 800 Taka. The inventory holding cost per unit per year is calculated as 5% of the selling price per unit. Assuming selling of the product starts from the outset of production and there is no occurrence of shortages of the product, find
   1. Production quantity of the product produced in one setup of the machine which minimizes the annual total cost of setup and inventory holding, and also this minimal annual total cost.
   2. The amount of the produced product meets the demand after the production.

The reorder point of the product of a buyer if its delivery lead time is 6 days