Question

Mary Rivera, inventory control manager for of Metaluna Vision, is in the business of producing 30" smart televisions. Metaluna annual demand for this type of television is 24,000 units, and the company produces televisions in batches. The company operates for 200 days each year and has a daily demand of 50 televisions. The cost to set up a manufacturing process is $250, and it cost Metaluna $20 to carry a television for a period of a year. How many televisions should Metaluna produce in each batch?

Answer 1

Company operating days in a year = 200

Daily demand = 50 televisions

So,annual demand in a year = 200*50 = 10,000 televisions

(24,000 units demand shall not be considered, as operating days and daily demand is given)

cost to set up manufacturing process = $250 per order

Carrying cost = $20

EOQ formula =√( 2 * Annual demand * Ordering cost / Carrying cost)

= √(2*10000*250/20)

=√(250000)

= 500 Televisions

So, it should produce 500 televisions per batch.

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