Question

A manufacturer of hospital supplies has a uniform annual demand for 80,000 boxes of bandages. It costs ​$10 to store one box of bandages for one year and $160 to set up the plant for production. How many times a year should the company produce boxes of bandages in order to minimize the total storage and setup​ costs?

Answer 1

50 times

Step-by-step explanation:

For the computation of the number of times company should produce a year first we need to determine the EOQ which is shown below:-

`EOQ = \sqrt{(2* Annual\ demand* Ordering\ cost\ per\ order)/(Holding\ cost) }`

`= \sqrt{(2* 80,000* \$160)/(\$10) }`

=
`\sqrt{(25,600,000)/(10) }`

= 1,600

Now,

we will assume a number of times in a year is x, so that the company manufacture bangles

`x = (Annual\ demand)/(EOQ)`

=
`(80,000)/(1,600)`

= 50 times

Therefore for computing the number of times the company should produce a year we simply applied the above formula.