Question

A shop that makes candles offers a scented candle, which has a monthly demand of 400 boxes. Candles can be produced at a rate of 36 boxes per day. The shop operates 20 days a month. Assume that demand is uniform throughout the month. Setup cost is $60 for a run, and holding cost is $2 per box on a monthly basis. Determine the economic production quantity.

Answer 1

Economic Production Quantity = 233.55 boxes per month =234 Boxes

Step-by-step explanation:

EPQ =
`\sqrt{(2KD)/(h(1-x)) }`

K= Set up cost = $60

D =Demand rate = 400

H= holding cost = $2

x= Demand Rate / Production Rate = 400/ (36*20) =0.56

substitute values into formula

EPQ =
`\sqrt{(2*60*400)/(2(1-0.56)) }`

= 233.55 Boxes per month

Answer 2

Answer:232 boxes

Step-by-step explanation: