Old Harbour pastries can produce their famous apple pies at a rate of 1650 cases of 48 pies each per day. The firm distributes the pies to regional stores and restaurants at a steady rate of 250 cases per day. The cost of setup, cleanup, idle time in transition from other products to pies, etc., is $320. Annual holding costs are $11.50 per case. Assume 250 days per year.

Required:

a. Determine the optimum production .

b. Determine the number of production runs per year

c. Determine maximum inventory.

d. Determine total inventory-related (setup and carrying) costs per year.

Formula

Optimal production quantity Q^*= 2 DC_s/C_h (1- d/p)

total cost of the production = Annual holding cost + Annual set up cost

Q/2 (1- d/p) C_h + D/QC_s

The maximum inventory level is Q (1 -d/p)