Arthur Meiners is the production manager of Wheel- Rite, a small producer of metal parts. Wheel-Rite supplies Cal- Tex, a larger assembly company, with 10,000 wheel bearings each year. This order has been stable for some time. Setup cost for Wheel-Rite is $40, and holding cost is $.60 per wheel bearing per year. Wheel-Rite can produce 500 wheel bearings per day. Cal- Tex is a just-in-time manufacturer and requires that 50 bearings be shipped to it each business day.
Required:
a) What is the optimum production quantity?
b) What is the maximum number of wheel bearings that will be in inventory at Wheel-Rite?
c) How many production runs of wheel bearings will Wheel-Rite have in a year?
d) What is the total setup plus holding cost for Wheel-Rite?