Question

You are lucky enough to be the owner of Cats_R_Us. Every month you are making (self-producing)and selling 60 beer coolers which cost you $85 each with ordering (set-up) cost of $700 per order.Also, your interest rate is calculated annually at 28% and you know that your production speed is150 coolers a month. (a) What should be your optimal production batch size? (b) What is your maximal inventory level? (c) A supplier offers you the price of $75 a cooler if you buy more than 300 coolers. Should you produce or buy the coolers? Why?

Fig: 1

Fig: 2

Fig: 3

Fig: 4