Concept explainers
a)
To calculate: The optimal size of the production run.
Introduction:
Economic production quantity (EPQ):
The economic production quantity is used to determine the amount a company or a retail outlet should purchase at every order so as to minimize the associated total inventory costs. It is done by balancing the holding cost and the ordering cost.
b)
To calculate: The average holding cost per year.
Introduction:
Average holding cost:
The average holding cost is the cost associated with storing the inventory of unsold items. It will also consider the cost of loss of goods, labor and other associated costs.
c)
To calculate: The average setup cost per year.
Introduction:
Average setup cost:
The average setup cost is the expense involved in setting up a business which includes the machinery, labor, infrastructure and the cost of other associated requirements.
d)
To calculate: The total cost including the cost of lights per year.
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Principles Of Operations Management
- solve manuallyarrow_forward3) A company produces a part that is used in its production process. The company produces the part at a rate of 300 units per day. The daily demand for the product is 180 units. The annual demand for the part is 54,000 units and occurs consistently over the 300 days that the company operates yearly. The company incurs a setup cost of $300 each time the item is produced. The cost of carrying the item in inventory is estimated to be 25 percent of the item's $100 cost. How many units should the company produce each production run to minimize its inventory- associated costs?arrow_forwardRadovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12,300 flashing lights per year and has the capability of producing 100 per day. Setting up the light production costs $51. The cost of each light is $0.95. The holding cost is $0.05 per light per year.arrow_forward
- Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12,500 flashing lights per year and has the capability of producing 105 per day. Setting up the light production costs $52. The cost of each light is $1.00. The holding cost is $0.10 per light per year. a) What is the optimal size of the production run? Optimal Size of the Production run = Qp = b) What is the average holding cost per year? 2DS √ + [₁-9] units (round your response to the nearest whole number). Average Holding Cost per Year = Average Inventory x Holding Cost per Unit = decimal places). c) What is the average setup cost per year? Qp 27² × [1₁-11] Average Setup Cost = Number of Orders Placed per Year x Setup Cost per Order = d) What is the total cost per year, including the cost of the lights? Total Cost = Annual Holding Cost + Annual Setup Cost + Product Cost = $ -S= x Holding Cost per Unit = $…arrow_forwardCan you help me with the following question?arrow_forwardRadovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300days per year. It has orders for about 11,600 flashing lights per year and has the capability of producing 100 per day. Setting up the light production costs $51. The cost of each light is $0.95. The holding cost is $0.10 per light per year. a) What is the optimal size of the production run? nothing units (round your response to the nearest whole number).arrow_forward
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