A chemical plant produces sodium bisulfate in 140 kg bags. Demand for this product is 35 tonnes per day. The capacity for producim this product is 50 tonnes per day. Setup cost is $500, and storage and handling costs are $240 per tonne per year. The company operates 210 days a year. (Note: 1 tonne 1,000 kg). a. What is the optimal number of bags per production run? (Round your intermediate calculations to 2 decimal places and the fine answer to the nearest whole number.) Optimal number of bags 2958 b. What would the average inventory level be for this lot size? (Round your intermediate calculations to 2 decimal places and the final answer to the nearest whole number.) Average inventory bags c. Determine the approximate length of a production run, in days. (Round the intermediate calculations and final answer to 2 decimal places.) Run length days d. About how many production runs per year would there be? (Round your intermediate calculations to 2 decimal places and th final answer to 1 decimal place.) Runs per year e. How much could the company save annually in inventory control cost if the setup cost could be reduced to $250 per productie and the optimal production quantity is recalculated and used? (Round the intermediate calculations and final answer to 2 decin places.) $4 Annual Savings

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
icon
Related questions
icon
Concept explainers
Topic Video
Question
A chemical plant produces sodium bisulfate in 140 kg bags. Demand for this product is 35 tonnes per day. The capacity for producing
this product is 50 tonnes per day. Setup cost is $500, and storage and handling costs are $240 per tonne per year. The company
operates 210 days a year. (Note: 1 tonne = 1,000 kg).
a. What is the optimal number of bags per production run? (Round your intermediate calculations to 2 decimal places and the final
answer to the nearest whole number.)
Optimal number of bags
2958
b. What would the average inventory level be for this lot size? (Round your intermediate calculations to 2 decimal places and the
final answer to the nearest whole number.)
Average inventory
bags
c. Determine the approximate length of a production run, in days. (Round the intermediate calculations and final answer to 2
decimal places.)
Run length
days
d. About how many production runs per year would there be? (Round your intermediate calculations to 2 decimal places and the
final answer to 1 decimal place.)
e. How much could the company save annually in inventory control cost if the setup cost could be reduced to $250 per production rur
and the optimal production quantity is recalculated and used? (Round the intermediate calculations and final answer to 2 decimal
places.)
Runs per year
24
Annual Savings
Transcribed Image Text:A chemical plant produces sodium bisulfate in 140 kg bags. Demand for this product is 35 tonnes per day. The capacity for producing this product is 50 tonnes per day. Setup cost is $500, and storage and handling costs are $240 per tonne per year. The company operates 210 days a year. (Note: 1 tonne = 1,000 kg). a. What is the optimal number of bags per production run? (Round your intermediate calculations to 2 decimal places and the final answer to the nearest whole number.) Optimal number of bags 2958 b. What would the average inventory level be for this lot size? (Round your intermediate calculations to 2 decimal places and the final answer to the nearest whole number.) Average inventory bags c. Determine the approximate length of a production run, in days. (Round the intermediate calculations and final answer to 2 decimal places.) Run length days d. About how many production runs per year would there be? (Round your intermediate calculations to 2 decimal places and the final answer to 1 decimal place.) e. How much could the company save annually in inventory control cost if the setup cost could be reduced to $250 per production rur and the optimal production quantity is recalculated and used? (Round the intermediate calculations and final answer to 2 decimal places.) Runs per year 24 Annual Savings
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Inventory management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, management and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Understanding Business
Understanding Business
Management
ISBN:
9781259929434
Author:
William Nickels
Publisher:
McGraw-Hill Education
Management (14th Edition)
Management (14th Edition)
Management
ISBN:
9780134527604
Author:
Stephen P. Robbins, Mary A. Coulter
Publisher:
PEARSON
Spreadsheet Modeling & Decision Analysis: A Pract…
Spreadsheet Modeling & Decision Analysis: A Pract…
Management
ISBN:
9781305947412
Author:
Cliff Ragsdale
Publisher:
Cengage Learning
Management Information Systems: Managing The Digi…
Management Information Systems: Managing The Digi…
Management
ISBN:
9780135191798
Author:
Kenneth C. Laudon, Jane P. Laudon
Publisher:
PEARSON
Business Essentials (12th Edition) (What's New in…
Business Essentials (12th Edition) (What's New in…
Management
ISBN:
9780134728391
Author:
Ronald J. Ebert, Ricky W. Griffin
Publisher:
PEARSON
Fundamentals of Management (10th Edition)
Fundamentals of Management (10th Edition)
Management
ISBN:
9780134237473
Author:
Stephen P. Robbins, Mary A. Coulter, David A. De Cenzo
Publisher:
PEARSON