Operations and Product Management

A chemical firm produces sodium bisulphate in 100-pound bags. Demand for this product is 20 tons per day. The capacity for producing the product is 50 tons per day. Setup cost $100 and storage and handling cost are $5 per ton a year. The firm operates 200 days a year. (Note 1 ton = 2000 pounds)

a)     How many bags per run are optimal?

b)    What would the average inventory be for this lot size?

c)     Determine the approximate length of a production run in days?

d)    About how many runs per year would there be?

e)     How much could the company save annually if the setup cost reduced to $25 per run?