Each question is worth 10 points (correct equation, variable input values, and solution) with partial credit given for the following; 1) correct equation and variable input values (7pts) and 2) correct equation only (3 pts). You will use the exam, exam formula sheet, and one additional piece of blank paper, attached, to show your solution to each problem. YOU MUST WRITE THE CORRECT FORMULA AND SHOW YOUR WORK IN THE ANSWER SPACE TO RECEIVE FULL OR PARTIAL CREDIT FOR EACH QUESTION.

Economic Production Quantity (EPQ)

(For Questions 6-10)

A coffee roaster in Richardson has opened a retail store adjacent to the production plant. The plant manager wishes to optimize the inventory costs of the companys best-selling coffee. The annual demand for the coffee is 36,000 bags and the plant works 240 days per yr. The plant can roast the coffee at a rate of 200 bags per day. The cost to prepare the equipment to start a production run is $200 and the annual inventory carrying cost is $3.6 per year.

Use 2 decimal places in your calculations (if needed) and round your final answer to the closest whole number.

6. What should be the optimum quantity of coffee to produce?

7. What is the maximum inventory achieved during a production run?

8. How many production runs are needed to meet the annual demand?

9. What is the average inventory of coffee?

10. What is the minimum total annual cost[WD2] of producing and storing the companys best-selling coffee?