Emarpy Appliance is a company that produces a llkinds of major appliances. Bud Banis, the president of Emarpy,is concerned a bout the production policy for the company's bestsellingrefrigerator. The annual demand has been about 8,000units each year, and this demand bas been constant throughoutthe year. The production capacity is 200 units per day. Each timeproduction starts, it costs the company $ 120 to move materialsinto place, reset the assembly line, and clean the equipment. Theholding cost of a refrigerator is $50 per year. The current productionplan calls for 400 refrigerators to be produced in each productionrun. Assume there are 250 working days per year.a) What is the daily demand of this product?b) If the company were to continue to produce 400 units each timeproduction starts, how many days would production continue?c) Under the current policy, how many production runs per yearwould be required? What would the annual setup cost be?d) lf the current policy continues, how many refrigerators wouldbe in inventory when production stops? What would theaverage inventory level be?e) If the company produces 400 refrigerators at a time, whatwould the total annual setup cost and holding cost be?f) If Bud Banis wants to minimize the total annual inventorycost, how many refrigerators should be produced in eachproduction run? How much would this save the company ininventory costs compared to the current policy of producing400 in each production run?~

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...

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Emarpy Appliance is a company that produces a ll
kinds of major appliances. Bud Banis, the president of Emarpy,
is concerned a bout the production policy for the company's bestselling
refrigerator. The annual demand has been about 8,000
units each year, and this demand bas been constant throughout
the year. The production capacity is 200 units per day. Each time
production starts, it costs the company $ 120 to move materials
into place, reset the assembly line, and clean the equipment. The
holding cost of a refrigerator is $50 per year. The current production
plan calls for 400 refrigerators to be produced in each production
run. Assume there are 250 working days per year.
a) What is the daily demand of this product?
b) If the company were to continue to produce 400 units each time
production starts, how many days would production continue?
c) Under the current policy, how many production runs per year
would be required? What would the annual setup cost be?
d) lf the current policy continues, how many refrigerators would
be in inventory when production stops? What would the
average inventory level be?
e) If the company produces 400 refrigerators at a time, what
would the total annual setup cost and holding cost be?
f) If Bud Banis wants to minimize the total annual inventory
cost, how many refrigerators should be produced in each
production run? How much would this save the company in
inventory costs compared to the current policy of producing
400 in each production run?~

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