In a noninstantaneous receipt model, daily demand is 55 units and daily production is 120 units, Co=$70 and Cc=$4 per unit per year. What is the maximum inventory level? (Assume that the facility is open 365 days per year.)
A) 616.9
B) 618.4
C) 620.3
D) 622.9

Question

Quizplus · Accepted Answer

The maximum inventory level in a noninstantaneous receipt model is calculated using the formula: Maximum Inventory = (Production Rate - Demand Rate) * (Economic Production Quantity / Production Rate). First, calculate the Economic Production Quantity (EPQ) using the formula: EPQ = sqrt((2 * Demand Rate * Co) / Cc * (Production Rate / (Production Rate - Demand Rate))). Plugging in the values: EPQ = sqrt((2 * 55 * 70) / 4 * (120 / (120 - 55))) = 1233.8. Then, Maximum Inventory = (120 - 55) * (1233.8 / 120) = 616.9.

In a Noninstantaneous Receipt Model, Daily Demand Is 55 Units