Assignment:
Karlberg's produces and sells pewter platters, mugs and bowls. Its most popular item is its salad bowl. The firm is open for business 360 days per year, and sells 20 salad bowls each business day. The firm is capable of producing 100 bowls per day.
The firm's setup cost per production lot is $400. The annual holding cost to keep a bowl in inventory is $20. The wholesale value of each finished bowl is $65. The firm does not maintain any safety stock.
a. What is the economic production lot-size?
b. How many cycles will there be per year? How many business days will there be in each production phase and in each drawdown or inventory depletion phase? What is the total number of business days per cycle?
c. What is the maximum cycle inventory (max. quantity of bowls in storage)? What is average inventory quantity? What are the maximum and average levels of inventories, in terms of dollar value?
d. What is the firm's total annual cost (setup + holding costs)?
e. Sketch a diagram of production and inventories over a 2-cycle period, labeling output, maximum inventory level, average inventory level, production phase, and inventory depletion or drawdown phase.