An Introduction to Management Science 13th Edition by David Anderson,Dennis Sweeney ,Thomas Williams ,Jeffrey Camm, Kipp Martin

Exercise 27

Nation-Wide Bus Lines is proud of its six-week bus driver training program that it conducts for all new Nation-wide drivers. As long as the class size remains less than or equal to 35, a six-week training program costs Nation-Wide $22,000 for instructors, equipment, and so on. The Nation-Wide training program must provide the company with approximately five new drivers per month. After completing the training program, new drivers are paid $1600 per month but do not work until a full-time driver position is open. Nation-Wide views the $1600 per month paid to each idle new driver as a holding cost necessary to maintain a supply of newly trained drivers available for immediate service. Viewing new drivers as inventory-type units, how large should the training and new driver idle-time costs? How many training classes should the company hold each year? What is the total annual cost associated with your recommendation?