Question

José Ramírez's company produces a product whose annual demand is 10,000 units. Since he works for 200 days a year, the demand is 50 units a day. The daily production is 200 units. Storage costs are $ 2 per unit per year; the cost of preparation is $ 200. If you want to batch produce this product, what would be the optimal batch size?

Q * = 1,633 pcs. T * = 0.163 year No. of orders per year = 6.12

Please include procedure.

Answer 1

Answers are in BOLD

Daily production rate, p	Given	200.00
Daily demand/usage rate, d	D/o	50.00
operation days, o=		200
Annual demand, D=	Given	10000
Setup or cost per order, S	Given	$200.00
holding cost per year, H=	Given	$2.00
Optimal Production quantity, Q=	SQRT(2*S*D/(H*(1-d/p)))	1633
#orders per year	Annual demand/ordered quantity, D/Q	6.12
order cycle=	days per year/orders per year	32.66 days or 0.163 years

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