CONNECT Manufacturing follows a just$-$in$-$time $($JIT$)$ production system and uses a Kanban

system for inventory control. The company produces a component with an annual demand of

$10,000$ units. The setup cost per production run is $$500,$ and the carrying cost per unit per year is

$$4.$ Daily production is $80$ units. The company operates $250$ days a year. The production lead

time is $27$ days. Safety stock is $14$ days$$ production.

a$)$ Calculate the production order quantity that minimizes the total annual inventory cost for

CONNECT Manufacturing. $($Ans: $2236\mathrm{.}07)$

b$)$ If the company decides to reduce the setup cost by $20\%,$ how would this impact the

optimal production order quantity? Increase or decrease? By what percentage? $($Ans:

$2,000$; decrease; $-10\mathrm{.}6\%)$

c$)$ Based on your answer in $($a$),$ determine the number of kanbans needed. $($Ans: $0\mathrm{.}98)$

d$)$ Based on your answer to $($b$),$ determine the number of Kanbans needed. $($Ans: $1\mathrm{.}1)$