Question

Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12,000 flashing lights per year and has the capability of producing 100 per day. Setting up the light production costs $50. The cost of each light is $1. The holding cost is $0.10 per light per year.

Answer 1

Answer:

The right solution is:

(a) 4,272 units

(b) $134.16

(c) $134.17

(d) $12,268.33

Explanation:

Seems that the given question is incomplete. The attachment of the complete question is provided below.

According to the question, the values are:

Annual demand,

D = 12,000

Number of days,

= 300

Daily demand,

d = $\frac{12000}{300}$

  = 40

Production rate,

P = 100

Ordering cost,

S = $50

Holding cost,

H = $0.10

(a)

The production run's optimal size will be:

Q = $\sqrt{\frac{2DS}{H(1-\frac{d}{P} )} }$

By putting the values, we get

   = $\sqrt{\frac{2\times 12000\times 50}{0.10\times (1-\frac{40}{100} )} }$

   = $\sqrt{20,000,000}$

   = $4,471.14$

or,

   = $4,472 \ units$

(b)

The average holding cost will be:

= $\frac{Q}{2}\times H\times [1-\frac{d}{P} ]$

= $\frac{4472}{2}\times 0.10\times [1-\frac{40}{100} ]$    

= $134.16$ ($)

(c)

The average setup cost will be:

= $\frac{D}{Q}\times S$

= $\frac{12000}{4472}\times 50$

= $134.17$ ($)

(d)

The total cost per year will be:

= $Avg. \ holding \ cost+ Avg. \ setup \ cost+Cost \ of \ purchase$

= $134.16+134.17+(1\times 12000)$

= $12,268.33$ ($)