Arthur Meiners is the production manager of Wheel-Rite, a small producer of meta

Question

Arthur Meiners is the production manager of Wheel-Rite, a small producer of metal parts. Wheel-Rite supplies Cal-Tex, a larger assembly company, with 9,800 wheel bearings each year. This order has been stable for some time. Setup cost for Wheel-Rite is $41, and holding cost is $0.60 per wheel bearing per year. Wheel-Rite can produce 530 wheel bearings per day. Cal-Tex is a just-in-time manufacturer and requires that 51 bearings be shipped to it each business day. a) What is the optimum production quantity? 1217 units (round your response to the nearest whole number). b) What is the maximum number of wheel bearings that will be in inventory at Wheel-Rite?units (round your response to the nearest whole number).

Explanation / Answer

a) EPQ = SQRT(2*D*S/H)*SQRT(p/p-d) = SQRT(2*9800*41/0.6)*SQRT(530/530-51) = 1217 units

b) Maximum Inventory Imax = Q*(1-d/p) = 1217*(1-51/530) = 1100 units

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