Question

Question 3 A firm wants to develop a level material use schedule based on the following data. What should be the setup cost? Desired lot size Annual Demand Holding Cost Daily production rate Working days per year Excel Access 728 units 40,000 units per year $20 per unit per year 320 units per day 250 days per year

Answer 1

Answer: 66.248

Explanation:

Desired Lot Size (Q) = 728 units

Annual Demand (D) = 40000 units per year

Holding Cost (H) = $20 units per year

Daily Production Rate (p) = 320 units per day

Daily Demand (d) = 40000/250 = 160 units per day

Setup Cost = S

$Q = \sqrt{\frac{2*S*D}{H*(1-d/p)}}$

Q^2 = (2*S*D)/(H*(1-d/p))

728^2 = (2*S*40000)/(20*(1-160/320))

S = $66.248