Be sure to always round inventory quantities (Q, R, SS, Imax) values up to the next integer for the final answers. All other values should be calculated based on the standard formulas without rounding them to integers and should be entered with one decimal place (e.g. average inventory, average number of orders, etc.).
Dillsboro Publishing Company produces books for the retail market. Demand for a current book on quantitative analysis is expected to be a constant 8900 copies per year. The cost of one copy is a very reasonable $29.99 per copy. The holding cost is 16% annual rate and production setup costs are $200 per setup. The equipment on which the book is produced has an annual production volume of 25,000 copies. Dillsboro has 250 working days per year.
a) What is the optimal production lot size?
b) What is the average number of production runs per year?
c) What is the maximum inventory that will be held?
d) What is the total annual holding cost?
e) What is the total annual setup cost?
f) What is the length of a production run (in days)?