Question

A manufacturer of hospital supplies has a uniform annual demand for 320 comma 000 boxes of bandages. It costs ​$10 to store one box of bandages for one year and $ 160 to set up the plant for production. How many times a year should the company produce boxes of bandages in order to minimize the total storage and setup​ costs?

Answer 1

Answer:

100 times per year

Explanation:

Data provided in the question:

Annual Demand , D = 320,000 boxes

Cost of storing one box, C = $10

Plant set up cost for production, c = $160

Now,

The optimal ordering quantity = $\sqrt\frac{2cD}{C}$

or

The optimal ordering quantity = $\sqrt\frac{2(160)(32,000)}{10}$

or

= 3200

Therefore,

Number of timer in year company produce boxes = $\frac{\textup{Demand}}{\textup{Optimal order quantity}}$

= $\frac{\textup{320,000}}{\textup{3,200}}$

= 100 times per year