Answer:
a 1,560 units
b 780 units
c 390 units
d $18,720
e $9,360
Explanation:
Given that;
Production = 292,000
Daily demand , d = 400
Annual demand , D = 400 × 365 = 146,000
Production rate , P = 292,000 ÷ 365 = 800
Set up cost , Cs = $100
Holding cost , Ch = $24
a. What is the production order quantity
= √2 * D * Cs / CH × (p / p - d)
= √ 2 * 146,000 * 100/24 × (800/800-400)
= √1216666.6667 × 2
= √2433333.3334
= 1559.91
=1,560 units approximated.
b. What is the maximum inventory on hand
= EPQ × [ 1 - (d÷p) ]
= 1,560 × [ 1 - (400 ÷ 800) ]
= 1,560 × 0.5
= 780 units
c. What is the average inventory
= Maximum inventory ÷ 2
= 780 ÷ 2
= 390 units
d. What are the total holding costs
= EOQ/2 * Holding cost
= 1,560/2 * 24
= 780 *24
= $18,720
e. What does it cost to manage the inventory
= Holding cost * (Maximum inventory ÷ 2)
= 24 * (780 ÷ 2)
= 24 * 390
= $9,360
