Question

A product has annual demand of 100,000 units. The plant manager wants production to follow a four-hour cycle. Based on the following data, what setup cost will enable the desired production cycle? d=800 per day (250 days per year), p=4000 units per day, H=$40 per unit per year, and Q=400 (demand for four hours, half a day).

Answer 1

Economic Production Quantity refers to the number of unit the company should add to the inventory and the production is made to minimize the total inventory cost. It maintain a balance between setup costs and carrying costs.

D 100,000 unts H000 Mb/ day 9 400 2 D 4000 2 X 100, 000 -15 25"6。