Question: Diskup produces a variety of personal computer products. High-density 3.5-inch disks are produced at a rate of 1,800 per day and are shipped out at a rate of 800 per day. The disks are produced in batches. Each disk costs the company 20 cents, and the holding costs are based on an 18 percent annual interest rate. Shortages are not permitted. Each production run of a disk type requires recalibration of the equipment. The company estimates that this step costs $180.
a. Find the optimal size of each production run and the time between runs.
b. What fraction of the time is the company producing high-density 3.5-inch disks?
c. What is the maximum dollar investment in inventory that the company has in these disks?