Question: Nation Wide Bus Lines is proud of its six-week bus driver training program that it conducts for all 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 5 new drivers per month. After completing the training program, the new drivers are paid $1600 per month but do not work full time 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 classes be to minimize Nation-Wide’s total annual training and new driver idle time costs? How many classes should the company hold each year? What is the total annual cost associated with your recommendation?

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