Question

What is the economic production quantity (EPQ) for the chemical plant, considering a demand of 20 tons per day, a capacity of 50 tons per day, a setup cost of $400, and storage and handling costs of $200 per ton per year, with the company operating 200 days a year?

a) 400 tons
b) 600 tons
c) 800 tons
d) 1,000 tons
e) 1,200 tons

Answer 1

The economic production quantity (EPQ) for the chemical plant is approximately 8.94 tons.

Step-by-step explanation:

To find the economic production quantity (EPQ) for the chemical plant, we can use the formula:

EPQ = √((2DS)/H)

Where:

• D is the demand per day (20 tons/day)
• S is the setup cost ($400)
• H is the storage and handling cost per ton per year ($200)

Using the given values, the calculation is:

EPQ = √((2 * 20 * 400)/200)

EPQ = √(16000/200)

EPQ = √80

EPQ ≈ 8.94

Therefore, the economic production quantity (EPQ) for the chemical plant is approximately 8.94 tons (rounded to two decimal places).