Question

. A shop that makes candles offers a scented candle, which has a monthly demand of 400 boxes. Candles can be produced at a rate of 36 boxes per day. The shop operates 20 days a month. Assume that demand is uniform throughout the month. Setup cost is $60 for a run, and holding cost is $2 per box on a monthly basis. Determine the economic production quantity. A. 147 boxes B. 176 boxes C. 193 boxes D. 232 boxes E. 208 boxes

Answer 1

Answer:

Option (D) is correct.

Explanation:

A = Annual demand = 400 x 12

                                 = 4800 boxes

p = 36 boxes per day

Operating days per month = 20 days

d = daily usage rate = 400 ÷ 20

                                 = 20 boxes

S = setup cost per lot = $60 per lot

H = Holding cost ($) = $2 per box per month = $24 per box per year

$Q=\sqrt{\frac{2AS}{H}(\frac{p}{p-d})}$

$Q=\sqrt{\frac{2\times4800\times60}{24}(\frac{36}{36-20})}$

$Q=\sqrt{24,000\times2.25}$

$Q=\sqrt{54,000}$

Q(economic production quantity) = 232 boxes