HAL Ltd. produces a line of high-capacity disk drives for mainframe computers. The housings for the drives are produced in Hamilton, Ontario, and shipped to the main plant inToronto. HAL uses the drive housings at a fairly steady rate of 720 per year. Suppose that the housings are shipped in trucks that can hold 40 housings at one time. It is estimated that the fixed cost of loading the housings onto the truck and unloading them on the other end is $300 for shipments of 120 or fewer housings (i.e., three or fewer truckloads). Each trip made by a single truck costs the company $160 in driver time, gasoline, oil, insurance, and wear and tear on the truck. HAL Ltd., discussed above, can produce the disk drive housings in the Hamilton, Ontario, plant at a rate of 150 housings per month. The housings cost HAL$85 each to produce, and the setup cost for beginning a production run is $700. Assume an annual interest rate of 28 percent for determining the holding cost.a. What is the optimal number of housings for HAL to produce in each production run?b. Find the time between initiation of production runs, the time devoted to production, and the downtime each production cycle.c. What is the maximum dollar investment in housings that HAL has at any point in time?
HAL Ltd. produces a line of high-capacity disk drives for mainframe computers. The housings for the drives are produced in Hamilton, Ontario, and shipped to the main plant inToronto. HAL uses the drive housings at a fairly steady rate of 720 per year. Suppose that the housings are shipped in trucks that can hold 40 housings at one time. It is estimated that the fixed cost of loading the housings onto the truck and unloading them on the other end is $300 for shipments of 120 or fewer housings (i.e., three or fewer truckloads). Each trip made by a single truck costs the company $160 in driver time, gasoline, oil, insurance, and wear and tear on the truck.
HAL Ltd., discussed above, can produce the disk drive housings in the Hamilton, Ontario, plant at a rate of 150 housings per month. The housings cost HAL$85 each to produce, and the setup cost for beginning a production run is $700. Assume an annual interest rate of 28 percent for determining the holding cost.
a. What is the optimal number of housings for HAL to produce in each production run?
b. Find the time between initiation of production runs, the time devoted to production, and the downtime each production cycle.
c. What is the maximum dollar investment in housings that HAL has at any point in time?
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