I need a detailed assistance to solve this problem in: Operations Analysis.3) A chemical manufacturer produces a compound at the rate of 10,000 pounds a day over 250 days each year. Annual demand for that compound is 600,000 pounds per year, and each pound sells for $3.90. There is a fixed setup cost of $1,500 for each production run, and a variable cost of $3.50 for each pound produced. The following costs are incurred:Interest rate on the cost of capital is 22% per annum (annually).Storage and handling costs amount to 12% of the compounds cost per annum.a)- What is the optimal production lot for the compound (write down the model name, its parameters and formula)?b)- Compute the uptime, downtime and cycle time in days, and find the cycle fraction of uptime and the cycle fraction of downtime (include the formula). c)- What are average annual holding and setup costs for the compound (include the formula)?d) - What is the annual profit for this compound?

Step1: Calculating the value of optimal production lot for the compound. We have,Model Name:…

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Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 46P

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I need a detailed assistance to solve this problem in: Operations Analysis.

3) A chemical manufacturer produces a compound at the rate of 10,000 pounds a day over 250 days each year. Annual demand for that compound is 600,000 pounds per year, and each pound sells for $3.90. There is a fixed setup cost of $1,500 for each production run, and a variable cost of $3.50 for each pound produced. The following costs are incurred:

Interest rate on the cost of capital is 22% per annum (annually).
Storage and handling costs amount to 12% of the compounds cost per annum.
a)- What is the optimal production lot for the compound (write down the model name, its parameters and formula)?
b)- Compute the uptime, downtime and cycle time in days, and find the cycle fraction of uptime and the cycle fraction of downtime (include the formula).
c)- What are average annual holding and setup costs for the compound (include the formula)?
d) - What is the annual profit for this compound?

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