Jack Spratt is the production manager for a manufacturing firm that produces wizzy-gadgets and other items.The annual demand for a particular wizzy-gadget is 1,600 units.The holding cost is $2 per unit per year.The cost of setting up the production line is $25.There are 200 working days per year.The production rate for this product is 80 per day.If his maximum inventory level is 180 units, how many units did he produce each time he started production of the wizzy-gadgets?
A)200
B)180
C)100
D)90

Question

Quizplus · Accepted Answer

The maximum inventory level is 180 units, and since the production rate is 80 per day, the production run must cover the demand during the production period plus the maximum inventory. Therefore, he produces 200 units each time (180 units maximum inventory + 20 units to cover demand during production).

Jack Spratt Is the Production Manager for a Manufacturing Firm