Question

The Friendly Sausage Factory (FSF) can produce hot dogs at a rate of 5,500 per day. FSF supplies hot dogs to local restaurants at a steady rate of 260 per day. The cost to prepare the equipment for producing hot dogs is $66. Annual holding costs are 46 cents per hot dog. The factory operates 296 days a year. a. Find the optimal run size. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Optimal run size b. Find the number of runs per year. (Round your answer to the nearest whole number.) Number of runs c. Find the length (in days) of a run. (Round your answer to the nearest whole number.) Run length (in days)

Answer 1

Answer:

Given:

• D = Annual demand = daily demand * no. of days in a year = 260*296 =76,960 units
• P = Annual production capacity = daily capacity *no of days in a year = 5500*296=1628000 units
• S = set up cost = $66
• H = holding cost = $0.46 per unit per year
• X = D/P =0.047273

Part a:

• Economic production quantity = [ (2DS) / (H*{1-X}) ]^1/2
• Putting the values = EPQ = 4814.556 =4815 units (Answer)

Part b:

• No. of runs per year = Demand / EPQ = 76960/4815 = 15.9848=16 run / yr (Answer)

Part c:

• Run length (Days) = EPQ / daily production rate = 4815/550 = 0.875374 = 1 day (Answer)