• The University of Oklahoma

• FIN MISC

13-6. The Ambrosia Bakery makes cake for freezing and subsequent sale. The bakery, which operates five days a week, 52 weeks a year, can produce cakes at the rate of 116 cakes per day. The bakery sets up the cakeproduction operation and produces until a predetermined number has been produced. When not producing cakes, the bakery uses its personnel and facilities for producing other bakery items. The setup cost for a production run of cakes is $700. The cost of holding frozen cakes in storage is $9 per cake per year. The annual demand for frozen cakes, which is constant over time, is 6000 cakes. Determine the following: a. Optimal production run quantity b. Total annual inventory costs c. Optimal number of production runs per year d. Optimal cycle time (time between run starts) e. Run length in working days D 6,000 d 23.08 / day p 116 / day $700 Co  $9 Cc  a. 2 2 700 6,000     23.08 1 5 1 116 o c C D Q d C p                 1,079.41 b. 1 2 C D C Q o c d TC Q p           700 6,000 9 1,079.4        23.08 1 1079.4 2 116          $7,782.84 c. 6,000 5.96 runs 1079.41 D Q   = 5.56 rund d. 260 46.67 working days 5.96  e. 1079.41 9.31 working days 116 Q p   13-20. Southwood Furniture Company is a U.S. Based furniture manufacturer that offshored all of its actual manufacturing operations to China about a decade ago. It set up a distribution center in Hong Kong from which the company ships its items to the United States on container ships. The company learned early on that it could not rely on local Chinese freight forwarders to arrange for sufficient containers for the company's shipments, so it contracted to purchase containers from a Taiwanese manufacturer and then sell them to shipping companies at the U.S. ports the containers are shipped to. Southwood needs 715 containers each year. It costs $1200 to hold a container at its distribution center, and it costs $6000 to receive an order for the containers. Determine the optimal order size, minimum total annual inventory cost, number of annual orders, and time between orders. D = 715 Co = 6,000 Cc = 1,200 Q = √ 2(6000)(715) 1,200 = 84.56 TC = (6,000 )(715) 84.56 + (1,200 )(84.56) 2 = $101,469.20 No. of orders = 8.46 Time between orders = 43.2