Tower Books, a publishing Company, produces books for the retail market. Demand for a current book is expected to occur at a constant annual rate of 7500 copies. The cost of one copy of the book is $27.50. The holding cost is based on 18% annual rate, and production setup costs are $550.00. The equipment on which the book is produced has an annual production volume of 21,000 copies. The Company uses 250 working days per year and the lead time for a production run is 12 days. Assume the company is willing to tolerate one stock-out per year and that the lead time demand follows a normal distribution with a standard deviation of 75 copies.
Using an appropriate Fixed Order Quantity system model compute the following values:
(a) Minimum cost production lot size
(b) Number of production runs per year
(c) Cycle time
(d) Length of production run
(e) Maximum inventory
(f) The reorder point
(g) Total annual stocking cost