Wilson Publishing Company produces books for the retail market. Demand for a cur
ID: 338904 • Letter: W
Question
Wilson Publishing Company produces books for the retail market. Demand for a current book is expected to occur at a constant annual rate of 7300 copies. The cost of one copy of the book is $13.5. The holding cost is based on an 18% annual rate, and production setup costs are $130 per setup. The equipment on which the book is produced has an annual production volume of 26500 copies. Wilson has 250 working days per year, and the lead time for a production run is 15 days. Use the production lot size model to compute the following values:
A) Minimum cost production lot size. Do not round intermediate values and round your final answer to two decimal places.
Q*=_______
B) Number of production runs per year. Do not round intermediate values and round your final answer to two decimal places
Number of production runs per year =
C) Cycle time. Do not round intermediate values and round your final answer to two decimal places.
T=_____Days
D) Length of a production run. Do not round intermediate values and round your final answer to two decimal places.
Production run length =________ days
E)Maximum inventory. Do not round intermediate values and round your final answer to two decimal places.
Maximum inventory =_______ Days
F) Total annual cost. Do not round intermediate values and round your final answer to two decimal places.
Total cost = $_______
G) Reorder point. Do not round intermediate values and round your final answer to two decimal places.
r =_______
Explanation / Answer
Demand (D) = 7300
Production cost (S) = 130
Holding cost (H) = Cost*Holding value % = 13.5*18% = 2.43
production rate (p) = Capacity/Working days = 26500/250 = 106
usage rate (u) = Demand/Working days = 7300/250 = 29.2
a) Production lot size (Q) = sqrt(2*D*S/H)*sqrt(p/(p-u)) = sqrt(2*7300*130/2.43)*sqrt(106/(106-29.2)) = 1038.29
b) Number of production runs = D/Q = 7300/1038.29 = 7.03
c) Cycle time = Q/u = 1038.29/29.2 = 35.56 days
d) Production run length = Q/p = 1038.29/106 = 9.80 days
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