4. .11 93%! 8:11 AM +966 50 440 4167 2 minutes ago Question 1: 430 points) As lu

Question

4. .11 93%! 8:11 AM +966 50 440 4167 2 minutes ago Question 1: 430 points) As luck bas it you inherited the New-Age Taco shop in Azzieville. As an astute Induscrial Engineer you decided to optiznize the aperatics and found aut th following: Your production rate is 100 tacos a day, while the demand is 80 weos a dey. Each buaking session requires a new setup thal casts yau $160, so you decided to make the Tacs in batches. Each taco costs yoa $2 dallar ard your bolding cost of baked sacos is besed on 50% interest annually ) Find the eptimal size of exch production ran? (How mny tscos should you buke esch lime). Assume 250 days a year ii) What fraction of' your time sev you baking piczns iti) Now you decided that your la should be saily hsif of'Q" (toed in (i). What should be your production speed now? De you need to speed up or slaw down? iv) Your production setup take 20 days te compicte (lead timel. What shuuld be your reonder point if you use Continsaous Review model?

Explanation / Answer

Production rate, p = 100 tacos a day

Demand rate, d = 80 tacos a day

Annual demand, D = 80*250 = 20000

Setup cost, S = 160

Holding cost, H = 2*50% = 1

i) Optimal run size, Q = ((2*D*S/H)/(1-d/p)) = ((2*20000*160/1)/(1-80/100)) = 5657 tacos

ii) Fraction of time in production = d/p = 80/100 = 0.80

iii) Maximum inventory = Q*(1-d/p) . Current maximum inventory = Q*(1-80/100) = Q/5 . To make it Q/2, therefore, To make the Maximum inventory equal to half of Q*, production rate need to speed up.

iv) Reorder point = Lead time*Demand rate = 20*80 = 1600 tacos

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