Problem:

Emarpy Appliance is a company which produces all kinds of major appliances. Bud Banis, the president of Emarpy, is concerned about the production policy for the companys bestselling refrigerator. The annual demand for this has been about 7250 units each year, and this demand has been constant throughout the year. The production capacity is 190 units per day. Each time production starts, it costs the company $130 to move materials into place, reset the assembly line, and clean the equipment. The holding cost of a refrigerator is $54 per year. The current production plan calls for 380 refrigerators to be produced in each production run. Assume there are 250 working days per year.

Required:

Question 1) What is the daily demand of this product?

Question 2) If the company were to continue to produce 380 units each time production starts, how many days would production continue?

Question 3) Under the current policy, how many production runs per year would be required?

Question 4) If the current policy continues, how many refrigerators would be in inventory when production stops?

Question 5) If the company produces 380 refrigerators at a time, what would the total annual set-up cost and holding cost be?

Question 6) If Bud Banis wants to minimize the total annual inventory cost, how many refrigerators should be produced in each production run? units

Provide thorough explanation of every question given in the problem.