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Eddi Din [679]
3 years ago
7

A supplier to Ford stamps out parts using a press. Changing a part type requires the supplier to change the die on the press. Th

is changeover currently takes four hours. The supplier estimates that each hour spent on the changeover costs $250. Demand for parts is 1,000 per month. Each part costs the supplier $100, and the supplier incurs an annual holding cost of 25%.
Required:
A) Determine the optimal production batch size for the supplier.
Business
1 answer:
Shtirlitz [24]3 years ago
6 0

Answer:

The optimal production batch size for the supplier is 980 units.

Explanation:

In order to calcuate the optimal production batch size for the supplier we have to use the following formula:

optimal production batch size= \sqrt(<u>2×Annual Demand×setup cost)</u>

                                                                 Holding Cost

optimal production batch size=\sqrt (<u>2×(1,000×12)×($250×4)</u>

                                                                  ($100×25%)

optimal production batch size=\sqrt(<u>2×12,000×$1,000)</u>

                                                               $25

optimal production batch size= 980 units

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