A chemical firm produces sodium bisulfate in 100 pound bags. Demand for this product is 20 tons per day. The capacity for producing the product is 50 tons per day. Setup costs $ 100, and storage and handling costs are $ 5 per ton a year. The firm operates 200 days a year. (1 ton 2,000 pounds.)
a. How many bags per run are optimal?
b. What would the average inventory be for this lot size?
c. Determine the approximate length of a production run, in days.
d. About how many runs per year would there be?
e. How much could the company save annually if the setup cost could be reduced to $ 25 per run?