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Economic production lot size:Elder Company

I need some help regarding the following problem:

Elder Company manufactures disposable diapers for newborn infants. Among its customers are vendors of medical supplies who purchase the diapers from Elder in specially packaged boxes of 100. Elder's plant operates 250 days per year, producing several sizes of diapers. When it is exclusively producing newborn-sized diapers, the production rate averages 1600 boxes per day. Each day the plant is open, demand for newborn-sized diapers averages 400 boxes per day. The cost of setup is $120 per setup. Each box costs $8 to produce, and the annual holding rate is 25%.

a. Based upon the information provided above, determine the EPLS.

b. What is the total annual inventory cost [TAIC] and the TC based upon the EPLS from part "a."

c. The company has been producing 5,000 units in each lot [run] to meet demand. What is the TC based upon their current production plan? What is your recommendation between current production plan and production plan from part "a"?

d. How many setups [each year] would be needed for the EPLS from part "a"?

e. How many days between setups for part "a"? [Assume 250 working days.]

f. How many days during the year would be available to produce other products [based on part "a"]?

g. Under part "a" what is the length (in working days) of a production run?

Solution Summary

This posting contains solution to the EPQ model problem of Elder Company.

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