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Scilla [17]
3 years ago
15

A production facility is trying to determine the best batch size for an item that is produced intermittently. This item has an a

nnual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What is the best batch size for this item?
Business
1 answer:
Alinara [238K]3 years ago
7 0

Answer:

The best batch size for this item is 400 units.

Explanation:

As given Annual demand (D)=1000 units, Carrying cost (H)=$10 per unit, set up cost (S)=$400.

As per the production order model formula will be:

\sqrt{2}D*S/H[1-d/p]} .

d for week=1000/50

                 =20. p per day

                 =40 units/7 days.

                 =5.71

d per day = 20/7

                =2.85

Therefore on applying all these:\sqrt{}2*1000*400/10[1-2.85/5.7.

on solving this we will get 400 Units

Therefore, The best batch size for this item is 400 units.

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