Holstein Computing Manufactures an Inexpensive Audio Card (Audio Max) for Assembly

question 105

Essay

Holstein Computing manufactures an inexpensive audio card (Audio Max) for assembly into several models of its microcomputers. The annual demand for this part is 100,000 units. The annual inventory carrying cost is $5 per unit and the cost of preparing an order and making production setup for the order is $750. The company operates 250 days per year. The machine used to manufacture this part has a production rate of 2000 units per day.
a. Calculate the optimum lot size.
b. How many lots are produced in a year?
c. What is the average inventory for Audio Max?
d. What is the annual cost of preparing the orders and making the setups for Audio Max?

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Definitions:

Naïve Optimism

An overly positive and simple belief in the most favorable outcome of any situation without considering the complexities or potential challenges.

Tangible Benefits

Concrete advantages or gains, such as profit or improved health, which are directly attributable to a specific action or policy.

Technological Innovations

New inventions and improvements in existing technologies that can potentially change people's lives and society's structures.

Industrial Model

A representation or system that embodies the principles and practices of large-scale manufacturing and industrial production.