1. A chemical company produces sodium bisulfate in 100-pound bags. Demand for the product is 40 tons per day. The capacity for production is 80 tons per day. Setup cost is $140, and storage and handling costs are $15 per ton per year, and company incurs fixed cost of $10,000, the firm operates 250 days per year. (Note: 1 ton = 1,000 kilo grams) Required: a. What is the annual demand in tons? b. What is the economic production quantity of the company? c. What is the average fixed cost of producing 20,000 tones? d. What is the variable cost of producing 20,000 tones?
1. A chemical company produces sodium bisulfate in 100-pound bags. Demand for the product is 40 tons per day. The capacity for production is 80 tons per day. Setup cost is $140, and storage and handling costs are $15 per ton per year, and company incurs fixed cost of $10,000, the firm operates 250 days per year. (Note: 1 ton = 1,000 kilo grams) Required: a. What is the annual demand in tons? b. What is the economic production quantity of the company? c. What is the average fixed cost of producing 20,000 tones? d. What is the variable cost of producing 20,000 tones?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. A chemical company produces sodium bisulfate in 100-pound bags. Demand for the
product is 40 tons per day. The capacity for production is 80 tons per day. Setup cost
is $140, and storage and handling costs are $15 per ton per year, and company incurs
fixed cost of $10,000, the firm operates 250 days per year. (Note: 1 ton = 1,000 kilo
grams)
Required:
a. What is the annual demand in tons?
b. What is the economic production quantity of the company?
c. What is the average fixed cost of producing 20,000 tones?
d. What is the variable cost of producing 20,000 tones?
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