Question

A toy manufacturer estimates the demand for a game to be 2000 per year. Each game costs $3 to manufacture, plus setup costs of $500 for each production run. If a game can be stored for a year for a cost of $2, how many should be manufactured at a time and how many production runs should there be to minimize costs

Answer 1

See below

Step-by-step explanation:

We will compute the above using the EOQ

EOQ = √ 2 × D × S / H

EOQ = √ 2 × 2,000 × 500 / 2 × 3

EOQ = 1,000

1,000 units of toys should be manufactured at a time

Production runs = 2,000 / 1,000

Production runs = 2