Answer :
a) Economic Production Quantity = 1,612 monitors
b) Number of setups = 1.4
c) Total cost = $972.12 per year
Explanation :
As per the data given in the question,
a) Economic Production Quantity = sqrt((2 × annual demand × set up cost) ÷ carrying cost × (1 - daily demand ÷ daily production))
=sqrt((2 × 2,250 × $350) ÷ $0.80 × (1 - 35 ÷ 140))
= 1,620.19
= 1,621 monitors
b) Number of setups = Annual demand ÷ Economic production quantity
= 2,250 ÷ 1,621
= 1.3880
= 1.4
c) Formula of Total cost = Carrying cost + Annual setup cost
Carrying cost=(Economic production quantity ÷ 2) × Carrying cost × (1 - daily demand ÷ daily production)
= (1,612 ÷ 2)× $0.80 × (1 -35 ÷ 140)
= $486.30
Annual setup cost = (Annual demand ÷ Economic production quantity) × setup cost
= (2,250 ÷ 1,621) × $350
= $485.812
So, Total cost = $486.30 + $485.812
= $972.12 each year
We simply applied the above formulas
