Question

A publishing company sells 450 comma 000 copies of certain books each year. It costs the company $ 1 to store each book for a year. Each time it must print additional​ copies, it costs the company $ 1 comma 000 to set up the presses. How many books should the company produce during each printing in order to minimize its total storage and setup​ costs?

Answer 1

The company produce 30,000 books during each printing in order to minimize its total storage and setup​ costs.

Step-by-step explanation:

The quantity that minimizes total storage and setup​ costs is known as Economic Order Quantity, in this case it is called the Optimum Batch Quantity.

Optimum Batch Quantity = √((2 × Annual demand × Setup cost per process) / Holding Cost per book.)

= √( (2 × 450,000 × $1,000) / $1)

= 30,000

Conclusion :

The company produce 30,000 books during each printing in order to minimize its total storage and setup​ costs.