EL Computer produces its multimedia notebook computer on a production line that has an annual capacity of 16,000 units. EL Computer estimates the annual demand for this model a 6000 units. The cost to set up the production line is $2345, and the annual holding cost is $30 per unit. Current practice calls for production runs of 500 notebook computers each month a. What is the optimal production lot size? b. How many production runs should be made each year? What is the recommended cycle time? c. Would you recommend changing the current production lot size policy from the monthly 500-unit production runs? Why or why not? What is the projected savings of your recommendation?

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
Question
EL Computer produces its multimedia notebook computer on a production line that has an
annual capacity of 16,000 units. EL Computer estimates the annual demand for this model a
6000 units. The cost to set up the production line is $2345, and the annual holding cost is $30
per unit. Current practice calls for production runs of 500 notebook computers each month
a. What is the optimal production lot size?
b. How many production runs should be made each year? What is the recommended cycle
time?
c. Would you recommend changing the current production lot size policy from the
monthly 500-unit production runs? Why or why not? What is the projected savings of
your recommendation?
Transcribed Image Text:EL Computer produces its multimedia notebook computer on a production line that has an annual capacity of 16,000 units. EL Computer estimates the annual demand for this model a 6000 units. The cost to set up the production line is $2345, and the annual holding cost is $30 per unit. Current practice calls for production runs of 500 notebook computers each month a. What is the optimal production lot size? b. How many production runs should be made each year? What is the recommended cycle time? c. Would you recommend changing the current production lot size policy from the monthly 500-unit production runs? Why or why not? What is the projected savings of your recommendation?
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
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