Colt 45 produces an ale, which it stores in barrels in its warehouse and supplies its distributors on demand. The demand for ale is 1,500 barrels per day. The brewery can produce 3,000 barrels per day and operates 356 days per year. It costs $7,900 to set up a production run for ale. Once it is brewed, the ale is stored in a refrigerated warehouse at an annual cost of $50 per barrel.
1. What is the optimal production quantity?
2. What will be the maximum inventory level.
3. What would be the time between production runs (in days)?
4. What is the total set-up + holding cost for Colt 45?