1. A tire
manufacturer is planning to introduce a new type of tire that is specifically
designed to haveanti-skid
properties. The manufacturer should increase the storage space by building a
system. The forecasted demand for the new tire is 10000 units per year and isexpected to
be stable for several years ahead. The cost of the raw material utilities and
labor is $40per tire.
The company estimates that it will require $200 per production setup and the
50000 tires/year. Assuming a) an inventory carrying cost of 20% of the cost of
the tireper year
b) a tire requiring 2 cu. ft of space and c) an average annual cost of $1 per
year per cu.ftdetermine
the optimal storage space that should be built?