Be sure to always round inventory quantities (Q, R, SS, Imax) values up to the next integer for the final answers. All other values should be calculated based on the standard formulas without rounding them to integers and should be entered with one decimal place (e.g. average inventory, average number of orders, etc.).
Andre Greipel is the owner of a small company that produces heart rate monitors. The annual demand is for 2,800 heart rate monitors, and Andre produces these devices in batches. On average, Andre can produce 150 monitors per day during the production process. Demand for monitors has been about 50 monitors per day. The cost to set up the production process is $600, and it costs Andre $0.75 to carry 1 monitor in inventory for one year. How many monitors should Andre produce in each batch?
a) What is the optimal economic production quantity?
b) On average, how many setups are required per year?
c) What is the total cost per year (holding plus setup)?