Ventura Lumber Mill (not a real company) in Salvador, Brazil, processes 9,000 logs annually and operates 300 days during a year. Ventura’s supplier delivers orders to the lumber mill at the rate of 50 logs per day. The cost to Ventura for placing an order to the supplier is US$1,400 per order, and the cost of carrying inventory of logs is US$20 per log per year:

1. What is the economic production quantity (EPQ)?

2. What is the average inventory level for this optimum production quantity?

3. How many production setups would there be in a year?

4. What is the optimal length of production run in days?

5. What would be the savings in annual inventory cost if the holding costs can be reduced to US$18 per log per year?