A coffee roaster in Richardson has opened a retail store adjacent to the production plant. Theplant manager wishes to optimize the inventory costs of the company’s best-selling coffee. Theannual demand for the coffee is 36,000 bags and the plant works 240 days per yr. The plant canroast the coffee at a rate of 200 bags per day. The cost to prepare the equipment to start aproduction run is $200 and the annual inventory carrying cost is $3.6 per year.Use 2 decimal places in your calculations (if needed) and round your final answer to the closestwhole number.a. What should be the optimum quantity of coffee to produce?(show your work in the space below)b. What is the maximum inventory achieved during a production run?(show your work in the space below)c. How many production runs are needed to meet the annual demand?(show your work in the space below)d. What is the average inventory of coffee?(show your work in the space below)e. What is the minimum total annual cost of producing and storing the company’s best-sellingcoffee?(show your work in the space below)

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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A coffee roaster in Richardson has opened a retail store adjacent to the production plant. The
plant manager wishes to optimize the inventory costs of the company’s best-selling coffee. The
annual demand for the coffee is 36,000 bags and the plant works 240 days per yr. The plant can
roast the coffee at a rate of 200 bags per day. The cost to prepare the equipment to start a
production run is $200 and the annual inventory carrying cost is $3.6 per year.
Use 2 decimal places in your calculations (if needed) and round your final answer to the closest
whole number.

a. What should be the optimum quantity of coffee to produce?
(show your work in the space below)
b. What is the maximum inventory achieved during a production run?
(show your work in the space below)
c. How many production runs are needed to meet the annual demand?
(show your work in the space below)
d. What is the average inventory of coffee?
(show your work in the space below)
e. What is the minimum total annual cost of producing and storing the company’s best-selling
coffee?
(show your work in the space below)


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