Problem 2. 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 day. One component of product X (call it component A) is produced in another department. This department, when it produces A, does so at the rate of 100 units per day. The setup cost when it switches over to produce component A is $50. The assembly line uses component A at the rate of 40 units per day. The annual holding cost for component A is $.50 per unit. The company has 250 working days per year. The cost of component A is $7 each. The department that makes component A must be notified 7 days in advance that it is required to produce component A.
a. What is the optimal lot size for production of component A?
b. What is the total annual cost for component A?
c. What is the annual holding cost for component A?
d. What is the annual setup cost for component A?
e. What is the cycle length for the optimal production run quantity calculated in part a)?
f. What is the production run length for the optimal production run quantity?