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Inventory Management: Wheel-Rite

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Arthur Meiners is a production manager of Wheel-Rite, a small producer of metal parts. Wheel-Rite supplies Cal-Tex, a larger assembly company, with 10,000 wheel bearings each year. This order has been stable for some time. Setup cost for Wheel-Rite is $40, and holding cost is $.60 per wheel bearing per year. Wheel-Rite can produce 500 wheel bearings per day; Cal-Tex is a just-in-time manufacturer and requires that 50 bearings be shipped to it each business day.

a) What is the optimum production quantity?

b) What is the maximum number of wheel bearings that will be in inventory at Wheel-Rite?

c) How many production runs of wheel bearings will Wheel-Rite have in a year?

d) What is the total step + holding cost for Wheel-Rite?

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Solution Summary

The solution computes optimum production quantity, production runs , total step + holding cost, maximum number of wheel bearings.

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