Morrison Manufacturing produces casings for sewing machines: large and small. To produce the different casings, equipment must be set up. The setup cost per production run is $18,000 for either casing. The cost of carrying small casings in inventory is $6 per casing per year; the cost of large casings is $18 per unit per year. To satisfy demand, the company produces 2,400,000 small casings and 800,000 large casings.

REQUIRED:

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

2. What data analytic type was used in Requirement 1 (descriptive, diagnostic, predictive, or prescriptive)? Justify your selection. See Exhibits 2.5 and 2.6, for a brief review of data analytics.

3. Suppose that Morrisons production engineer indicates that he has a method to reduce setup time; consequently, he predicts the setup cost will be reduced to $180. What will be the EOQ if this method works as predicted? Now indicate what data analytic type is being used.