Answered: Emarpy Appliance is a company which…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Emarpy Appliance is a company which produces all kinds of major. Bud Banis, the president of Emarpy, is concerned about the production policy for the company’s bestselling refrigerator. The annual demand for this has been about 8,000 units each year, and this demand has been constant throughout the year. The production capacity is 200 units per day. Each time production starts, it costs the company $120 to move materials into place, reset the assembly line, and clean the equipment. The holding cost of a refrigerator is $50 per year. The current production plan calls for 400 refrigerators to be produced in each production run. Assume there are 250 working days per year. (b) If the company were to continue to produce 400 units each time production starts, how many days would production continue? (c) Under the current policy, how many production runs per year would be required? What would the annual set-up cost be? (d) If the current policy continues, how many refrigerators would be in inventory when production stops? What would the average inventory level be?

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