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4. Dream Weavers manufactures wool-mix carpets. The cost of setting up the production process for a...

Question

4. Dream Weavers manufactures wool-mix carpets. The cost of setting up the production process for a...

4. Dream Weavers manufactures wool-mix carpets. The cost of setting up the production process for a production run is $800. T

4. Dream Weavers manufactures wool-mix carpets. The cost of setting up the production process for a production run is $800. The annual demand is estimated to be 28,000 yards of carpet. The annual carrying cost is S5 per yard. The manufacturing facility operates 350 days per year and produces 400 yards of carpet per day a. Find the optimal production run quantity for Dream Weavers. b. Find the minimum total inventory cost per year. c. Find the optimal length of a production run. d. Find the optimal number of production runs per year e. Find the optimal run cycle time (time between run starts Determine the maximum inventory level.

Answers

Daily demand of the carpet d = 28000/350 = 80

Daily production capability p =400

a. Optimum production run quantity = [ 2x demand per annum x set up cost / cost of holding a unit ( 1-d/p)]1/2

= [ 2 x28000 x800 / 5 x ( 1-0.2)]1/2

= 3346.64 =3347

b. Min total inventory cost per year = (1/2) x avg quantity per set up x cost of holding a unit per year x ( 1-d/p)

= 1/2 x3347 x 5 x0.8 = 6694

c.Optimum length of a production run = order size / daily production = 3347/400 = 8.36 days.

d. Number of production runs per year

annual demand / optimum production quantity = 28000/3347 =8.36

e

Quantities consumed during production run = 80x8.36 = 668.8

Remaining quantity = 3447-669 =2678

Number of days for which the quantity will be sufficient = 2678/80 = 33.47 days

which will be the cycle time between the runs.

f. Max inventory level will be at the time when production runs just stops = 2678 ( as calculated in e)


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