Problems

1. An appliance store sells plasma TVs. Annual demand is estimated at 1000 units. The cost to carry a TV in inventory for one year is $500, and the cost to place an order for plasma TVs is $400.

   • How many TVs should be ordered each time an order is placed?

   • How many orders per year should be placed?

   • What are the annual inventory and ordering costs?

2. Suppose that the Waterford Crystal company can produce up to 100 iced tea pitchers per day. Further suppose that the plant is open 250 days per year, and that annual demand is for 20,000 pitchers. The cost to hold a pitcher in inventory for a year might be $10, and the cost to set up the facility to produce iced tea pitchers might be $40.

   • What batch size would you recommend for iced tea pitchers?

   • How many batches per year should be produced?

   • What are the annual setup and inventory costs for iced tea pitchers?