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=400 per day (250 days per year), p=4000 units per day, H=$40 per unit per year, and Q=200 (demand for four hours, half a day). $2.00 $7.20 $18.00 $64.00 $1,036.80

Answer 1

Answer:

setup cost is $7.2

Explanation:

given data

annual demand = 100,000 units

production =  4 hour cycle

d = 400 per day (250 days per year)

p = 4000 units per day

H = $40 per unit per year

Q = 200

to find out

setup cost

solution

We will apply here EPQ formula for find set up cost S that is express as

Q = $\sqrt{\frac{2DS}{H} } \sqrt{\frac{p}{p-d} }$         ............1

200 = $\sqrt{\frac{2*400*250*S}{40} } \sqrt{\frac{4000}{4000-400} }$

now we take squaring on both sides and we get here

40000 = 5000 × S × 1.11

solve it we get her

S = $\frac{40000}{5000*1.11}$

S = 7.2

so setup cost is $7.2