Question

Radovilsky Manufacturing​ Company, in​ Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12 comma 200 flashing lights per year and has the capability of producing 95 per day. Setting up the light production costs ​$49. The cost of each light is ​$1.00. The holding cost is ​$0.10 per light per year. ​a) What is the optimal size of the production​ run? nothing units ​(round your response to the nearest whole​ number).

Answer 1

Answer:

The optimal size of production run is 4656

Explanation:

Annual Demand (D) = 12,200

Daily demand (d) = Annual Demand / Number of days

Daily demand (d) = 12,200 / 300

Daily demand (d) = 40.67

Production rate per day (p) — 95

Setup cost (S) = 51

Annual holding cost (H) = 0.1

 Part a)  

$Optimal Order Quantity (Q) = \sqrt{\frac{2*D*S}{H} } * \sqrt{\frac{p}{p-d} }$

$Optimal Order Quantity (Q) = \sqrt{\frac{2*12200*51}{0.1} } * \sqrt{\frac{95}{95-40.67} }$

$Optimal Order Quantity (Q) = \sqrt{12444000} * \sqrt{1.74536}$

Optimal Order Quantity (Q) = 3527.6 × 1.32

Optimal Order Quantity (Q)= 4,656.43

Optimal Order Quantity (Q)= 4,656

Therefore the optimal size of production run is 4656