Question: A variety of assembled products are made in hatches on a batch model assembly line. Every time a different product is produced, the line must be changed over, which causes lost production time. The assembled product of interest here has an annual demand of 12,000 units. 1 he changeover time to set up the line for this product is 6.0 hr. The company figures that the hourly rate for lost production time on the line due to changeovers is $200/hr. Annual holding cost for the product is $7.00/product. The product is currently made in batches of 1000 units for shipment each month to the wholesale distributor.
(a) Determine the total annual inventory cost for this product in hatch sizes of 1000 units.
(b) Determine the economic batch quantity for this product
(c) How often would shipments be made using this EOQ?
(d) How much would the company save in annual inventory costs if it produced batches equal to the EOQ rather than 1000 units?