A Toy Manufacturer Makes Its Own Wind-Up Motors, Which Are

question 201

Essay

A toy manufacturer makes its own wind-up motors, which are then put into its toys. While the toy manufacturing process is continuous, the motors are intermittent flow. Data on the manufacture of the motors appears below.
Annual demand (D) = 25,000 units Daily subassembly production rate = 1,000
Setup cost (S) = $85 per batch Daily subassembly usage rate = 400
Carrying cost = $2.00 per unit per year
(a) To minimize cost, how large should each batch of subassemblies be?
(b) Approximately how many days are required to produce a batch?
(c) How long is a complete cycle?
(d) What is the average inventory for this problem?
(e) What is the total annual inventory cost (holding plus setup) of the optimal behavior in this problem?

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Definitions:

Initial Public Offering (IPO)

The first sale of stock by a company to the public, marking the transition from a private entity to a public company.

Gross Spread

The difference between the underwriting expense of a security and the amount received from the selling group.

Offering Price

The price at which new shares are offered to the public by an issuer or by shareholders of the company.