Answer:
Explanation:
Given Demand D = 12,500 lights per year
Set up cost S = $51
Cost of each light (C) = $1
.05
Holding cost = $0.1 per light per year
Production p= 100 lights per day
Usage (d) = 12,500/300 days = 41.66(round up to 42)
= 42 lights per day
a) What is the optimal sizeof the production run?
Q =√{(2×D×S) / (H(1-(d / p)))}
Q =√{(2×12500×51)/(0.1(1-(42/100)))}
= 4688.577 = 4689 units
Q = 4689 units
b) What is the average holding cost per year?
Average holding cost per year = average inventory level * H
= (Q/2)H[1- (d/p)]
= (4689/2)0.1[1-(42/100)]
= $135.98
c) What is the average setup cost per year?
average setup cost per year = (D/Q)S
= (12,500/4689)× 51
= 135.97
d) What is the total cost per year, including the cost of the lights?
Total cost = D*C + total set up cost + total holding cost
12,500 ×1.05 + 135.98 + 135.97
Total cost = $ 13,396.95
