The cost to set u for producing a standard component is approximately $200. Once set up they can produce at a rate of approximately 500 units/month (6,000 units per year) at a cost of $100 each. A monthly demand is estimated to be 400 units. If the firm uses 25% annual rate for holding inventory (assume 200 working days per year):
(a) What is the most economical lot size to produce (ERL) ?
(b) What is the average inventory level (units)?
(c) What is the inventory rate (i.e., the proportion of production that goes into inventory)?