The JMT Creamery Co. produces ice-cream bars for vending machines and has an annual demand for 72000 bars. The Co. has the capacity to produce 400 bars per day. It takes only a few minutes to adjust the production set-up cost estimated at P7.50 per set up for the bars, and the firm is reluctant to produce too many at one time because the storage cost (refrigeration) is relatively high at P1.50 /bar/year. The firm supplies vending machines with its buko pie ice cream bars on 360 days of the year. (a) What is the most economical number of bars to produce during any one production run? (b) What is the optimal length of the production run in days? (c) What is the total inventory cost? (d) What is the maximum inventory level?

The JMT Creamery Co. produces ice-cream bars for vending machines and has an annual demand for 72000 bars. The Co. has the capacity to produce 400 bars per day. It takes only a few minutes to adjust the production set-up cost estimated at P7.50 per set up for the bars, and the firm is reluctant to produce too many at one time because the storage cost (refrigeration) is relatively high at P1.50 /bar/year. The firm supplies vending machines with its buko pie ice cream bars on 360 days of the year. (a) What is the most economical number of bars to produce during any one production run? (b) What is the optimal length of the production run in days? (c) What is the total inventory cost? (d) What is the maximum inventory level?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 18P

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