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mote1985 [20]
3 years ago
15

A manufacturer of hospital supplies has a uniform annual demand for 320,000 boxes of bandages. It costs ​$10 to store one box of

bandages for one year and $ 160 to set up the plant for production. How many times a year should the company produce boxes of bandages in order to minimize the total storage and setup​ costs?
Business
1 answer:
strojnjashka [21]3 years ago
3 0

Answer:

Number of times for production  = 10 times

Explanation:

<em>Economic batch quantity (EBQ) i</em><em>s also known as economic production run, It is the optimum production run that a manufacturer should operate to minize set up cost and carrying cost. </em>

Carrying cost is the cost of keeping inventory while set up cost is cost of getting machines ready for production

The number of times the company should produce =

Annual demand / the economic production run(EBQ)

It is calculated as follows:

Economic batch quantity =√2× Co× D / Ch

Where ,

D - annual demand -320,000,

Ch -holding cost per unit per annum - $10

Co- set up cost - $160 ,

= √ (2 × 160× 320000/10)

= 3200

Number of times for production

= 320,000/3,200

= 10 times

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