Question

Question 4 (5 points) Acme stamping produces seat brackets for a major manufacturer of stadium seating. They sell an average of 68,000 brackets per year. Their stamping machine operates for 8 hours per day, 250 days per year and can produce 150 brackets per hour. It costs them $345 to set up the stamping machine for a production run. The brackets cost $0.47 each to make, and Acme uses 10% of the unit cost to estimate the annual inventory holding cost. Calculate the economic production quantity for seat brackets.

Answer 1

Solution:

Economic production quantity = √2DOP/C(P-D)

Where, D= annual demand =68,000 , O = One Set up cost=$345 , C = Holding cost $0.47×10% =$0.047, P = Annual production rate = 250×8×150 = 300,000

Now, putting values in the formula:

EPQ = √2×68,000×$345×300,000/$0.047(300,000-68,000)

= 35,929.13 (rounded off)