Arthur Meiners is the production manager of Wheel Rite, a small producer of metal parts. Wheel-Rite supplies Cal Tex, a larger assembly company, with 10,000 wheel bearings each year. This order has been stable for some time. Setup cost for Wheel-Rite is $40, and holding cost is $.60 per wheel bearing per year. Wheel-Rite can produce 500 wheel bearings per day. Cal Tex is a just-in-time manufacturer and requires that 50 bearings be shipped to it each business day.
a) What is the optimum production quantity?
b) What is the maximum number of wheel bearings that will be in inventory at Wheel-Rite?
c) How many production runs of wheel bearings will Wheel-Rite have in a year?
d) What is the total setup 1 holding cost for Wheel-Rite?