Question

Race one motors is an indonesian car manufacturer. at its largest manufacturing facility, in jakarta, the company produces subcomponents at a rate of 300 per day, and it uses these subcomponents at a rate of 12,500 per year (of 250 working days). holding costs are $2 per item per year, and ordering (setup) costs are $30 per order. what is the economic production quantity? (hint: you can compute daily demand by using annual demand and number of working days in a year)

A - 49
B - 650
C - 671
D - 440

Answer 1

The economic production quantity (EPQ) can be calculated using the formula: EPQ = √(2DS/H). It represents the number of subcomponents to produce per order. In this case, the economic production quantity is 55.

Step-by-step explanation:

The economic production quantity (EPQ) can be calculated using the formula:

EPQ = √(2DS/H)

Where:

• D is the annual demand for the subcomponents (12,500)
• S is the setup (or ordering) cost per order ($30)
• H is the holding cost per unit per year ($2)

First, we need to calculate the daily demand by dividing the annual demand by the number of working days in a year (250):

Daily demand = 12,500 / 250 = 50

Now, we can substitute the values into the EPQ formula:

EPQ = √(2 * 50 * $30 / $2) = √(3000) = 54.77

Since EPQ represents the number of subcomponents to produce per order, we can round up to the nearest whole number:

Economic production quantity = 55