Answer:
1. 5,231 units
2. $156 per year
3. $108 per year
4. $11,474
Explanation:
Here
D is Annual Demand which is 11,800 units per year
O is ordering cost and is $48 per setup
H is the holding cost per unit per year which is $0.1 per unit per year
P is production rate per year = 95 units per day * 300 days = 28,500 units
Now here,
1. Optimal Size (Production Run) = Sqaureroot [2OD * 1 / H * (1 - D/P)]
By putting values, we have:
Optimal Size of Production Run = Sqrt [2* $48* 11,800 Units* 1 / 0.1* (1 - 11,800/28,500)] = 5,231 units
2. Average Total Holding Cost per year = H * (1 - D/P) * Q / 2
Here
Q is the Optimal Size of Production Run
By putting values, we have:
Average Total Holding Cost per year = $0.1 * (1 - 11,800/28,500) * 5,321 / 2
= $156 per year
3. Average Set up Cost per year = D / Q * O
By putting values, we have:
Average Set up Cost per year = 11,800 / 5,231 * $48 per setup
= $108 per year
4. Total Cost per Year = Average Total Holding Cost per year + Average Set up Cost per year + Total cost of purchase of 11,800 units
By putting values, we have:
Total Cost per Year = $156 + $108 + 11,800 * $0.95
= $11,474
