The Scottish manufacturer Lasim needs to determine the order quantity of a particular clay tile, classified as A-124. The transport cost between the production site and the warehouse is negligible.
Moreover, it is known that the demand is 15 000 parts per month, the value of a single item is € 3.50, the banking interest rate is 6.8%, the cost of raw materials is € 1.13 per each unit of product, the cost of energy is estimated to be € 0.17 per each unit of product, the labor cost is € 45 000 per year for each of the three workers, the reorder rate is 130 units of product per day and the equipment set-up cost is € 0.72.
Moreover, about three minutes are needed to produce a single unit of product, and the cost of the employee who issues the production order is € 40 000 per year. This activity takes about 5% of her time. Shortages are not allowed.