Great Buy Inc. manufactures and then sells the Model x15 DVD Players. It costs GB Inc. $57...

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Great Buy Inc. manufactures and then sells the Modelx15 DVD Players. It costs GB Inc. $57 to produce a unit,and the estimated annual demand for DVD players is 4500 units.Great Buy Inc. used to hold 100 units safety stock to preventoccasional shortages. GB Inc. uses 15% rate of holding cost a year,and setting up its production line each time a production run isplanned costs $900. Production capacity for the DVD Player is 6000units. Currently , Great Buy Inc. produces in lots that meet twomonths of demand. Answer the following question.

1.

a) What is the total cost of the current policy ?

b) For the current policy of part 'a', what % of the time, theproduction line is not busy producing the DVD players?

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4.5 Ratings (1021 Votes)

Annual Demand D 4500 unitsCost per unit C 57Holding Cost H 15 15 57 855Cost per run S 900Safety Stock SS 100 unitsProduction capacity 6000 unitsCurrent Production size Q 2 See Answer

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