4. A regional printing company mixes its own ink from powder that they buy in bulk. They use
40 bottles of ink per day, 350 days per year. When they mix the ink, they can mix 120 bottles
per day. They are trying to determine how many bottles of ink to mix in a production run in
order to be responsive to their usage needs. They have found that the ink turns hard on the
shelf if they make too much and keep it too long. On the other hand, it is a messy job and
they don't want to mix ink every day. The set-up cost is $6.50 and the annual carrying cost
$.75.
a. What is the economic production lot size (rounded up to the nearest integer)?
b. What is the total annual cost at Q*?
c. What is the average inventory level at Q*?