Question

Wicomico 3DeLight makes 3D printers for entrepreneurs. The business is open 275 days per year. It has been selling 8000 3D printers per year and can produce 100 per working day. Getting a production run started costs $150, and the holding cost for a 3D printer is $1400/printer/year. The manufacturing cost of each 3D printer is $500. Part a - What is the size of the optimal production run for the company? Part b – what is Wicomico 3DeLight’s total costs for the year, including the cost of the 3D printers?

Answer 1

Here

Number of days business run: 275

Printers produced per day: 100

No of printers sold: 8000

Starting cost: $150

Holding cost: $1400/printer/year

Manufacturing cost: $500.

a. Optimal production rum:

Where D is demand

S is production run started cost

H is holding or inventory cost

=41.4 = 42 units

Number of runs in an year: Uniits sold/Optimal production run

=4000/42 = 190.47 = 191

This is possible as business is open for 275 days.

b. Cost incurred:

Annual ordering and holding cost: C = D/Q*S + Q/2*H

where,

D is demand = 8000

Q is order quantity = 42 units

H is holding cost = $ 14000

S is production run started cost = $ 150

C = 8000/42*150 + 42/2*14000

C = 322571.42

Cost of manufacturing: Number of units * Manufacturing cost

= 8000*500 = $4000000

Total cost: Startup cost and holding cost + manufacturing cost = 322571.42 + 4000000 = $4322571.42