Station 1 ———–Product A – demand of 120 units per day

Station 1————Product B- demand of 120 units per day

Station 1 ———–Product

C- demand of 120 units per day

Above

is diagram for process that is capable of producing 3 different

products A,B, C. The demand rate for each of the products is a steady 5

units per hour(120 units per day-24hrs). Station 1, which cost 2.0

Billion, produces either product at rate of 600 units per day when in

operation but it takes 6 hours to change over between any of the

products. 2 highly specialized workers are needed for this set up. Only

set up specialists are allowed to set up Station 1 and these 7

workers(2 per shift plus one rotating

one, resulting in 2 of them at any time) are all earning salaries.

They are required to be there all time, are paid for all the time,

including between set ups, even though they are not allowed to perform

any other task.

Manufacturing costs of products are $300/unit

holding cost rate equals 20%/year

Assume the factory operates 350 days per year, 24 hours per day

a. What are the relevant costs for determining batch size for products a,b,c

b What is the optimal run length for a product?

c. what are the annual inventory costs?