Question

Radovilsky Manufacturing? Company, in? Hayward, California, makes flashing lights for toys. The company operates its production facility

300

days per year. It has orders for about

11 comma 800

flashing lights per year and has the capability of producing

100

per day. Setting up the light production costs

?$49

.

The cost of each light is

?$1.00

.

The holding cost is

?$0.15

?a) What is the optimal size of the production? run? ?b) What is the average holding cost per? year? ?c) What is the average setup cost per? year? ?d) What is the total cost per? year, including the cost of the? lights? ?(round your response to two decimal? places).

Answer 1

Given Annual demand D = 11,800

Daily production p = 100

Daily demand d = 11800/300 = 39.33

Setup cost S = $49

Holding cost H = $0.15

Cost C = $1.00

a)  optimal size of the production? run Q

Q= 3564.69

B) Average holding cost

= 162.20

C) average setup cost per? year = (D/Q)S = (11800/3564.69)*49 = 162.20

d) Total cost per year = Purchase cost (C*D) + holding cost per? year + setup cost per? year

= (1*11800) + (162.20) + 162.20 = 12124.4

Total cost per year = 12124.24