A chemical firm produces sodium bisulfate 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 costs $100, and storage and
handling costs are $5 per ton a year. The firm operates 200 days a year. (Note: 1 ton = 2,000 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 could be reduced to $25 per run?
