Question: Problem 4 : ( 2 5 points ) The annual total inventory cost of the economic production quantity model is given by T C (
Problem : points
The annual total inventory cost of the economic production quantity model is given by
where is the production quantity per cycle, is the setup cost, is the holding cost per unit per year, is the annual demand rate, and is the annual production rate.
a Show that the economic production quantity is given by
b Show that the minimum annual total cost is given by
c A product is demanded at a monthly rate of units. It costs AED to store one unit of the product for one year. It costs AED to setup the production facility in order to manufacture the product. The actual annual production rate is units per year. Find the economic production quantity, the minimum total inventory costs, and the minimum number of setups per year.
d Due to some constraint's, the facility can only produce units of the product after each setup. What is the effects of this restriction on the total inventory cost?
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