A company is about to begin production of a new product. The manager of the department that will produce one of the components for the product wants to know how often the machine will be available for other work. The machine will produce the item at a rate of 180 units a day. Annual demand for the product is 25,000. Assembly will take place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at a cost of $320. Inventory holding costs will be $12 a year.
a. What run quantity should be used to minimize total annual costs?