Hummer Manufacturing produces casings for stereo sets: large and small. In order to pro¬

duce the different casings, equipment must be set up. Each setup configuration corresponds to a particular type of casing. The setup cost per production run—for either casing—is $4,000.

The cost of carrying small casings in inventory is $8 per casing per year. The cost of carry¬

ing large casings is $12 per year. The company produces 49,000 small casings and 150,000 large casings per year. The company sells an average of 196 small casings per work day and an average of 600 large casings per work day. It takes Hummer 2 days to set up the equip¬

ment for small or large casings. Once set up, it takes 7 work days to produce a batch of small casings and 10 days for large casings. There are 250 work days available per year.

Required:

1. Compute the number of small casings that should be produced per setup to minimize total setup and carrying costs for this product.

2. Compute the total setup and carrying costs associated with the economic order quan¬

tity for the small casings.

3. What is the reorder point for small casings?

4. Repeat Requirements 1 through 3 for the large casings.

5. Using the economic order batch size, is it possible for Hummer to produce the amount that can be sold of each casing? Does scheduling have a role here? Explain. Is this a push- or pull-system approach to inventory management? Explain.