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A company can produce a part it uses in an assembly operation at the rate of 90 an hour. The company operates eight hours a day, 300 days a year. Daily usage of the part is 500 parts. The company uses the part everyday. The annual holding cost is $4.50 per unit, and setup is $550.

1)What is the Economic Production Quantity?
2)What is the total inventory cost at EPQ?
3)Assuming that production begins when there are no parts on hand, what is the maximum number of parts in inventory?
4)The machine that is dedicated to this product will be scheduled for maintenance which requires 8 days. Does this interrupt production cycles, or is there enough time between cycles to perform the maintenance? Explain with proper calculations.
5)If the set up cost can be reduced by 50%, what would be the revised EPQ and the total inventory savings?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M9443985

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