Question

Scenario D.1 Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. Use the information in Scenario D.1. If Jerry chooses to produce batches dictated by the economic production lot size (ELS) model, how many days elapse between the start of consecutive production runs (what is the time between runs or TBO)

Answer 1

Scenario D.1

Jerry Allison Plumbing Supplies:

Time between production runs = 2.25 days.

Step-by-step explanation:

With EOQ = 12,000 and working days of 300 per annum

The company can produce 40 units (12,000/300) per day, producing on all the days.

But since the production rate is 90 units per day for the economic production lot size, this can be produced in 133 days (12,000/90). This leaves 167 days as free of production.

Therefore, the company can produce every 2.25 days (90/40), this will give 133 days of production (300/2.25). The time between production runs is therefore 2.25 days. This can be converted into hours, and stated as: the next production run starts after every 54 hours.