Maximum inventory level and inventory cost for production

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One product produced by Moore-Funn Novelties is a voodoo doll. It has a fairly constant demand of 40,000 per year. The soft plastic body is the same for all the dolls, but the clothing changes periodically to conform to fad hysterics. Production runs for different products require changing the molds and settings of plastic-forming machines, new patterns for the cutters, and sewers, and some adjustments in the assembly area. The production rate of previous runs has averaged 2000 dolls per day. Setup costs are estimated at $700 per production run.

A doll that sells for $12.50 at a retail outlet is valued at $1.80 when it comes off the production line. Complete carrying cost as for production items are set at 20% of the production cost and are based on average inventory level. What is the optimal production time, the maximum inventory level and inventory cost for the production of the doll?

Reference no: EM13842654

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