Montegut Manufacturing Produces a Product for Which the Annual Demand

question 54

Essay

Montegut Manufacturing produces a product for which the annual demand is 10,000 units. Production averages 100 per day, while demand is 40 per day. Holding costs are $2.00 per unit per year; set-up costs $200.00. If they wish to produce this product in economic batches, what size batch should be used?
What is the maximum inventory level?
How many order cycles are there per year?
How much does management of this good in inventory cost the firm each year?

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Definitions:

Ocean Basin

The deeper parts of the ocean, especially those that are not underlain by continental crust.

Uplift

The process by which areas of the Earth's crust are raised to higher elevations, often as a result of geological forces such as tectonic movements.

Mid-ocean Ridges

Underwater mountain ranges where new oceanic crust is formed through volcanic activity.

Oceanic Crust

The part of the Earth's crust that underlies the oceans. It is thinner, denser, and younger than the continental crust.