Wilson Publishing Company produces books for the retail market. Demand for a cur
ID: 394333 • Letter: W
Question
Wilson Publishing Company produces books for the retail market. Demand for a current book is expected to occur at a constant annual rate of 7,200 copies. The cost of one copy of the book is $14.50. The holding cost is based on an 18% annual rate, and production setup costs are $150 per setup. The equipment on which the book is produced has an annual production volume of 25,000 copies. Wilson has 250 working days per year, and the lead time for a production run is 15 days. Use the production lot size model to compute the following values:
Minimum cost production lot size. Round your answer to the nearest whole number. Do not round intermediate values.
Number of production runs per year. Round your answer to two decimal places. Do not round intermediate values.
Cycle time. Round your answer to two decimal places. Do not round intermediate values.
Length of a production run. Round your answer to two decimal places. Do not round intermediate values.
Maximum inventory. Round your answer to the nearest whole number. Do not round intermediate values.
Explanation / Answer
Minimum cost production lot size. Round your answer to the nearest whole number. Do not round intermediate values.
Usage Rate = 7200/250 = 29 units a day
Production (P) = 25000/250 = 100 units a day
Cost production lot size = 2(7200)x150/ 2.61 x 100/(100-29) = 909.71x1.18 = 1073.45
Minimum cost production lot size = 1073.45
Number of production runs per year. Round your answer to two decimal places. Do not round intermediate values.
7200/1073.45 = 6.7 times per year
Cycle time. Round your answer to two decimal places. Do not round intermediate values.
1073.45/29 = 37.01 or 37 day
Length of a production run. Round your answer to two decimal places. Do not round intermediate values.
1073.45/ 100 = 10.73 days
Maximum inventory. Round your answer to the nearest whole number. Do not round intermediate values.
1073.45/100 x (100-29) = 762.14 units
P.S.- please leave a comment if any explanation is needed
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