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In a machine shop, pins of 15 mm diameter are produced at a rate of 1000 per month and the same is consumed at a rate of 500 per month. The production and consumption continue simultaneously till the maximum inventory is reached. Then inventory is allowed to reduce to zero due to consumption. The lot size of production is 1000. If backlog is not allowed, the maximum inventory level is:  
  • a)
    400  
  • b)
    500  
  • c)
    600  
  • d)
    700 
Correct answer is option 'B'. Can you explain this answer?
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In a machine shop, pins of 15 mm diameter are produced at a rate of 10...
MAXIMUM INVENTORY 
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In a machine shop, pins of 15 mm diameter are produced at a rate of 10...
Given information:
- Production rate: 1000 pins per month
- Consumption rate: 500 pins per month
- Lot size of production: 1000 pins

Objective:
To determine the maximum inventory level.

Approach:
To find the maximum inventory level, we need to calculate the difference between the production and consumption rates and then determine the maximum number of months it takes to reach the maximum inventory level.

Calculation:
1. Calculate the net production rate:
Net production rate = Production rate - Consumption rate
Net production rate = 1000 - 500
Net production rate = 500 pins per month

2. Calculate the number of months required to reach the maximum inventory level:
Number of months = Lot size of production / Net production rate
Number of months = 1000 / 500
Number of months = 2 months

3. Calculate the maximum inventory level:
Maximum inventory level = Production rate * Number of months
Maximum inventory level = 1000 * 2
Maximum inventory level = 2000 pins

4. Since the question states that inventory is allowed to reduce to zero due to consumption after reaching the maximum inventory level, the maximum inventory level is equal to the lot size of production in this case.

Therefore, the maximum inventory level is 1000 pins, which corresponds to option B.
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In a machine shop, pins of 15 mm diameter are produced at a rate of 1000 per month and the same is consumed at a rate of 500 per month. The production and consumption continue simultaneously till the maximum inventory is reached. Then inventory is allowed to reduce to zero due to consumption. The lot size of production is 1000. If backlog is not allowed, the maximum inventory level is:a)400 b)500 c)600 d)700Correct answer is option 'B'. Can you explain this answer?
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