Healthy Plants Ltd. (HP) produces its premium plantfood in 50-pound bags. Demand for the product is 100,000pounds per week. HP operates 50 weeks per year and canproduce 250,000 pounds per week. The setup cost is $200and the annual holding cost rate is $0.55 per bag. Currently,HP produces its premium plant food in batches of 1,000,000pounds.(a) Calculate the maximum inventory level for HP.(b) Calculate the total annual costs of this operating policy.
Healthy Plants Ltd. (HP) produces its premium plantfood in 50-pound bags. Demand for the product is 100,000pounds per week. HP operates 50 weeks per year and canproduce 250,000 pounds per week. The setup cost is $200and the annual holding cost rate is $0.55 per bag. Currently,HP produces its premium plant food in batches of 1,000,000pounds.(a) Calculate the maximum inventory level for HP.(b) Calculate the total annual costs of this operating policy.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Healthy Plants Ltd. (HP) produces its premium plant
food in 50-pound bags. Demand for the product is 100,000
pounds per week. HP operates 50 weeks per year and can
produce 250,000 pounds per week. The setup cost is $200
and the annual holding cost rate is $0.55 per bag. Currently,
HP produces its premium plant food in batches of 1,000,000
pounds.
(a) Calculate the maximum inventory level for HP.
(b) Calculate the total annual costs of this operating policy.
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