What is the optimal lot size of part 2?
A metal fabrication shop has a single punch press. There are currently three partsthat the shop has agreed to produce that require the press, and it appears that theywill be supplying these parts well into the future. You may assume that the press isthe critical resource for these parts, so that we need not worry about the interactionof the press with the other machines in the shop. The relevant information here is:
|
Part Number |
Demand/year |
Set up Cost ($) |
Cost per Unit ($) |
Production rate/year |
|
1 |
2,500 |
80 |
16 |
45,000 |
|
2 |
5,500 |
120 |
18 |
40,000 |
|
3 |
1,450 |
60 |
22 |
26,000 |
Holding costs are based on an 18 percent annual interest rate, and the products are to be produced in sequence on a rotation cycle. Setup times can be considered negligible.
What is the optimal lot size of part 2?
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