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A meat packing firm estimates that it will sell 15,000 tons of beef during the coming...

A meat packing firm estimates that it will sell 15,000 tons of beef during the coming year. Cold storage for beef costs $10.00 per ton, and it costs the firm $300 each time it shifts from processing poultry to beef. What is the optimal lot size?

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Answer #1

This is just a variant of the economic order quantity and therefore needs to be answered by solving the following equation:

So the optimal lot size is 948.68 or we may round it to 949 tons

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