Explain the two causes of market failures. given their definitions, could a market be affected by both types of market failures
1 answer:
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Answer:
(a) 1,078.12 copies
(b) 6.68 runs per year
(c) 37.43 days
(d) 10.78 days
(e) 767.62 copies
(f) $2,003.48
(g) 432 copies
Explanation:
Given that,
Annual demand (D) = 7200 copies
Cost of the book (C) = $14.50
Holding cost (H) = 18% of cost of book = 18% of $14.50
= $2.61
Setup costs (S) = $150
Annual production volume = 25,000 copies
Number of working days = 250
Lead time (L) = 15 days
Daily demand (d) = Annual demand ÷ Number of working days
= 7200 ÷ 250
= 28.8 copies
Daily production (p) = Annual production ÷ Number of working days
= 25000 ÷ 250
= 100 copies
(a) Minimum cost production lot size (Q):
Q = 1,078.12 copies
(b) Number of production runs:
= Annual demand (D) ÷ Production quantity (Q)
= 7,200 ÷ 1,078.12
= 6.68 runs per year
(c) Cycle time:
= Production quantity (Q) ÷ Daily demand (d)
= 1,078.12 ÷ 28.8
= 37.43 days
(d) Length of a production run:
= Production quantity (Q) ÷ Daily production (p)
= 1,078.12 ÷ 100
= 10.78 days
(e) Maximum inventory (Imax):
= Q × (1 - d÷p)
= 1,078.12 × (1 - 28.8 ÷ 100)
= 767.62 copies
(f) Total annual cost:
= Annual holding cost + Annual setup cost
= [(Q ÷ 2) × H × (1 - d÷ p)] + [(D ÷ Q) × S]
= [(1,078.12 ÷ 2) × $2.61 × (1 - 28.8 ÷ 100)] + [(7,200 ÷ 1,078.12) × $150]
= $1,001.74 + $1,001.74
= $2,003.48
(g) Reorder point:
= Daily demand × Lead time
= 28.8 × 15
= 432 copies