Question

The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $100, holding cost is $24 per unit per year, the daily demand rate is 20 and the daily production rate is 100. What is the production order quantity for this problem

Answer 1

Step-by-step explanation:

Calculation to determine the production order quantity for this problem

Sqrt [ (2*3650*100)/ (24*(1-20/100)) ] = 500

Sqrt [ (2*50000*20)/ (10*(1-20/100)) ] = 500

=√200,000/(10*0.8)

=200,000/8

=250000