CHOCODOKIA is a famous chocolate factory in Switzerland. Every year, the company must produce 2200 units (with the same amount of production). Sales are evenly distributed throughout the year. The company wants to determine the lot size which can minimize the cost of ordering (setup costs) and costs of storage (carrying costs). Given that the cost of producing each unit is $50, carrying costs are 10% of the average inventory and setup costs are $20 (per production run). Using the Differentiation Method (1st and 2nd Derivative Test), Determine economic lot size for the company and provide an explanation of the results of these calculations.

CHOCODOKIA is a famous chocolate factory in Switzerland. Every year, the company must produce 2200 units (with the same amount of production). Sales are evenly distributed throughout the year. The company wants to determine the lot size which can minimize the cost of ordering (setup costs) and costs of storage (carrying costs). Given that the cost of producing each unit is $50, carrying costs are 10% of the average inventory and setup costs are $20 (per production run). Using the Differentiation Method (1st and 2nd Derivative Test), Determine economic lot size for the company and provide an explanation of the results of these calculations.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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