A drink bottler uses one bottling line to fill three different sized soft drink containers with the same soft drink. Other drinks are bottled on the same line as well. We shall consider only one product whose sizes are 10, 16, and 20 ounces, and whose demands are constant enough to be safely considered deterministic. The major setup cost to convert to this type of drink is estimated to be $65. It costs $22 to switch from one container size to another.

The demand rates for this family of items are shown below. The carrying charge has been established as 0.24 $/$/year. Moreover, there is substantial excess capacity in the operation, so it is reasonable to ignore capacity considerations.

Item i 1 2 3 Description 10 Ounces 16 Ounces 20 Ounces Di (units/year) 120,000 95,000 80,000 vi ($/unit) 0.30 0.48 0.60

a. Find the appropriate run quantities for each item.

b. Using Equation 10.5, find a lower bound on the total cost. P-96