Question

A production facility is trying to determine the best batch size for an item that is produced intermittently. This item has an annual 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?
A) 400
B) 65
C) 800
D) 283

Answer 1

Answer:

best batch size is 400 units

Explanation:

Given data:

Annual demand (D) =1000 units,

Carrying cost (H) = $10 per unit,

set up cost (S)=$400.

model formula is

$Q = \sqrt{\frac{2DS}{H[1-(d/p)]}}$

d or p for week = 1000/50

                =20. p per day

                =40 units/7 days.

                =5.71

d per day = 20/7

               =2.85

$Q = \sqrt{\frac{2\times 1000\times 400}{10[1-(2.85/5.71)]}}$

on solving we get 400 unit