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Digiron [165]
3 years ago
9

Inventory Control and Planning Neilsen Cookie Company sells its assorted butter cookies in containers that have a net content of

1 lb. The estimated demand for the cookies is 1,200,000 1 lb containers. The setup cost for each production run is $490, and the manufacturing cost is $0.42 for each container of cookies. The cost of storing each container of cookies over the year is $0.5. Assuming uniformity of demand throughout the year and instantaneous production, how many containers of cookies should Neilsen produce per production run in order to minimize the production cost
Business
1 answer:
xenn [34]3 years ago
4 0

Answer:

 48,497.42  containers

Explanation:

<em>The economic order quantity (EOQ) is a model that is used to determine the optimum order size that minimizes the balance of carrying and ordering cost.</em>

T<em>his model can also be modified to determine the optimum batch quantity, that is the number of units to produced in a production run. The model is given below  </em>

EOQ = √2× Co× D/Ch

EOQ - economic production run, Co- set up cost per run, Ch- carrying cost per unit per year, D-  demand

EOQ = 2 √2× 490× 1,200,000/0.5

EOQ =  48,497.42  containers

Neilsen should produce  48,497.42  containers per production run in order to minimize the production cost

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