Question 1: (30 points) As luck has it you inherited the New-Age Taco shop in Ag

Question

Question 1: (30 points) As luck has it you inherited the New-Age Taco shop in Aggieville. As an astute Industrial Engineer you decided to optimize the operations and found out the following: Your production rate is 100 tacos a day, while the demand is 80 tacos a day. Each baking session requires a new setup that costs you $160, so you decided to make the Tacos in batches. Each taco costs you $2 dollar and your holding cost of baked tacos is based on 50% interest annually. Find the optimal size of each production run? (How many tacos should you bake each time). Assume 250 days a year. i) ii) What fraction of your time are you baking pizzas? ii) Now you decided that your Imex should be exactly half of o* (found in (i). What should be your production speed now? Do you need to speed up or slow down? iv) Your production setup take 20 days to complete (lead time). What should be your reorder point if you use Continuous Review model?

Explanation / Answer

Production rate, p = 100 tacos a day

Demand rate, d = 80 tacos a day

Annual demand, D = 80*250 = 20000

Setup cost, S = 160

Holding cost, H = 2*50% = 1

i) Optimal run size, Q = ((2*D*S/H)/(1-d/p)) = ((2*20000*160/1)/(1-80/100)) = 5657 tacos

ii) Fraction of time in production = d/p = 80/100 = 0.80

iii) Maximum inventory = Q*(1-d/p) . Current maximum inventory = Q*(1-80/100) = Q/5 . To make it Q/2, therefore, To make the Maximum inventory equal to half of Q*, production rate need to speed up.

iv) Reorder point = Lead time*Demand rate = 20*80 = 1600 tacos

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.