Decentralized Pull Systems (10 points):

A material handling system is being selected to connect two work centers that are separated by 1000 feet. The annual demand is estimated at 250,000 units, and the yearly cost to hold one unit in inventory is $0.20.

Options	Fixed Cost ($)	Variable cost ($/load)	Maximum load size (capacity)
Manual System	$35,000	$0.12	14
Motorized system	45,000	0.25	12

a.Which option would you choose?

b.Instead, if each item has a value of $1.50, and annual holding cost rate is 30% which option would you choose if

1. (i) The production batch size is equal to the material-handling load capacity?

2. The production batch is 1200 units as determined by an EMQ calculation?