Problem 1: ABC Inc. manufactures and sells auto parts for their clients. One particular part is used approximately 2,000,000 per year. It is produced in batches of 2,000,000. Recently, they are thinking about a new strategy and considering at batch sizes of 50,000. Material cost is $1.25, labor cost $1.50 and distribution cost $0.25 per part. An interest rate of 22% has been established to represent opportunity and storage costs.
A) What is the cost of the first strategy?
B) What is the optimal EOQ?
C) Suppose the plant can make a maximum of 75,000 parts a week. What is the optimal size production run?
Problem 2: The local community boys decide to hold a cookie sale to support an event. They decided to sell all cookies for $2.00 each. They discover through a study that demand is distributed N (225, 20^2). Each cookie costs $0.25 to buy and sells that day for $2.00. If they don't sell all the inventory, each unsold cookie is donated at a revenue per item of $0.00. They estimate that a lost sale costs them the lost $1.75 revenue over the $0.25 to get the cookies.
A) Make a recommendation to this group for an optimal strategy. If they sell items for 20 days, how much fund they can raise?
B) If a community senior buys all unsold cookies at $.50 per item. How much can they make in an average month's 20-day cookie sale?
Will need step by step process to solve the above problems.
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