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An office furniture company sells 5,500 chairs of a popular style per year. Chairs are produced the company’s factory. The comptroller has estimated the inventory cost rate at 0.4 per year. Labor, mail, and receiving costs per order are estimated at $125. Additionally, for each order the factory must setup the machines to produce the requested amount. Each setup costs $235 and takes two hours. Each unit requires one hour of processing time. Each chair is comprised of $20 of purchased material and $25 of value added. Throughput time in the plant is approximately five times total processing time. Determine the optimal order quantity. Assume that the plant operates 2,500 hours per year.

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91628056

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