Problem 6 Cannes Croissants (not a real company) wishes to determine the optimum production quantity for its top selling product, almond croissants. The annual demand for almond croissants is 12,000 units. The setup costs for a production run of the croissants is US$15. The holding cost per unit per year is US$0.50. Production is most efficient when 80 croissants are produced per day. The company operates 300 days during a year. a What is the economic production quantity (EPQ)? b How many production runs will there by per year? c What is the maximum inventory level? d What is the total annual cost (in US dollars)? e What is the length of a production run in days?
Problem 6 Cannes Croissants (not a real company) wishes to determine the optimum production quantity for its top selling product, almond croissants. The annual demand for almond croissants is 12,000 units. The setup costs for a production run of the croissants is US$15. The holding cost per unit per year is US$0.50. Production is most efficient when 80 croissants are produced per day. The company operates 300 days during a year. a What is the economic production quantity (EPQ)? b How many production runs will there by per year? c What is the maximum inventory level? d What is the total annual cost (in US dollars)? e What is the length of a production run in days?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Problem 6
Cannes Croissants (not a real company) wishes to
determine the optimum production quantity for its top
selling product, almond croissants. The annual demand
for almond croissants is 12,000 units. The setup costs for
a production run of the croissants is US$15. The holding
cost per unit per year is US$0.50. Production is most
efficient when 80 croissants are produced per day. The
company operates 300 days during a year.
a What is the economic production quantity (EPQ)?
b How many production runs will there by per year?
c What is the maximum inventory level?
d What is the total annual cost (in US dollars)?
e What is the length of a production run in days?
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