Rolf Steps is the production manager for a local manufacturing firm.This company produces staplers and other items.The annual demand for a particular stapler 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 Rolf decided to produce 200 units each time he started production of the stapler,what would his maximum inventory level be?
A)200
B)180
C)100
D)90
E)None of the above

Question

Quizplus · Accepted Answer

The maximum inventory level is calculated using the formula: Maximum Inventory = Production Quantity - (Demand Rate/Production Rate) * Production Quantity. Here, Production Quantity is 200, Demand Rate is 1600/200 = 8 per day, and Production Rate is 80 per day. So, Maximum Inventory = 200 - (8/80)*200 = 180.

Rolf Steps Is the Production Manager for a Local Manufacturing