Product X is a standard item in a firms inventory. Final assembly of the product is performed
Question:
Product X is a standard item in a firm’s inventory. Final assembly of the product is performed on an assembly line that is in operation every weekday. One of the components of product X (call it component X1) is produced in another department. This department, when it produces X1, does so at the rate of 100 units per day. The assembly line uses component X1, at the rate of 40 units per day. Daily usage rate (d) = 40 units per day. Annual demand (D) = 10,000 (40 units per day x 250 working days) Daily production (P) = 100 units per day Cost of production setup (S) = $50 Annual holding cost (H) = $0.50 per unit per year Cost of component X1 (C) = $7 each Lead time (L) = 7 days a. Given the data, what is the optimal production lot size of component X1?
Operations and Supply Chain Management
ISBN: 978-0078024023
14th edition
Authors: F. Robert Jacobs, Richard Chase