Question

A manufacturer of hospital supplies has a uniform annual demand for boxes of bandages. It costs ​$ to store one box of bandages for one year and 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

75 times

Explanation:

Calculation for How many times a year should the company produce boxes of bandages

First step is to find the EOQ using this formula

EOQ=√2×D×S/H

Where,

S = Ordering cost per order is 160

D =Annual demand is $180,000

Holding cost=10

Let plug in the formula

EOQ=√2×$180,000×160/10

EOQ=√57,600,000/10

EOQ=2,400

Now let calculate How many times a year should the company produce boxes of bandages using this formula

Numbers of times to produce boxes of bandages=D/Q

Let plug in the formula

Numbers of times to produce boxes of bandages=$180,000/2,400

Numbers of times to produce boxes of bandages=75 times

Therefore How many times a year should the company produce boxes of bandages in order to minimize the total storage and setup​ costs will be 75 times