A company is about to begin production of a new product. The manager of the department thatwill produce one of the components for the product wants to know how often the machine usedto produce the item will be available for other work. The machine will produce the item at a rateof 200 units a day. Eighty units will be used daily in assembling the final product. Assembly willtake place five days a week, 50 weeks a year. The manager estimates that it will take almost a fullday to get the machine ready for a production run, at a cost of $300. Inventory holding costs willbe $10 a year. a. What run quantity should be used to minimize total annual costs?

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
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A company is about to begin production of a new product. The manager of the department that
will produce one of the components for the product wants to know how often the machine used
to produce the item will be available for other work. The machine will produce the item at a rate
of 200 units a day. Eighty units will be used daily in assembling the final product. Assembly will
take place five days a week, 50 weeks a year. The manager estimates that it will take almost a full
day to get the machine ready for a production run, at a cost of $300. Inventory holding costs will
be $10 a year.

a. What run quantity should be used to minimize total annual costs?

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