Company in inventory costs compared to current policy

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Reference no: EM132183162

Electrico is a company that produces all kinds of major appliances. Gabby Thomas, the president of Electrico, is concerned about the production policy for the company’s best- selling washing machine. The demand of washing machine is 625 units each month, and this demand is constant throughout the year. The production capacity is 300 units per day. Each time production starts, it costs the company $ 240 to move materials into place, reset the assembly line, and clean the equipment. The holding cost of each washing machine is $ 100 per year. The current production plan calls for 600 washing machines to be produced in each production run. Assume there are 250 working days per year. If Gabby Thomas wants to minimize the total annual inventory cost, how many washing machines should be produced in each production run? How much would this save the company in inventory costs compared to the current policy of producing 600 washing machines in each production run?

Reference no: EM132183162

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