Question

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50. The production order quantity for this problem is approximately 750 units. What is the average inventory for this problem?

Answer 1

300 units

Step-by-step explanation:

Given:

Daily demand rate, d = 10

Daily production rate, p = 50

Production order quantity, Q = 750

Required:

Find the average inventory

First find the maximum inventory using the formula:

`I_m_a_x = (Q)/(p)(p-d)`

`=(750)/(50) (50 - 10)`

`= 15 * 40`

`= 600`

Now find the average inventory using the formula:

`I_a_v_g = (I_m_a_x)/(2)`

`= (600)/(2) = 300`

The average inventory for this problem is 300 units