Question

Flemming Accessories produces paper slicers used in offices and in art stores. The minislicer has been one of its popular items: Annual demand is 10,000 units and is constant throughout the year. Flemming produces the minislicers in batches. On average, Flemming can manufacture 100 minislicers per day. Demand for these slicers during the production process is 50 per day. The setup cost for the equipment necessary to produce the minislicers is $100. Carrying costs are $1 per minislicer per year.

1. How many minislicers should Flemming manufacture in each batch? (Optimal production quantity)
2. How many orders per year are needed with the optimal policy? (Optimal no. of production runs per year.)
3. What is the annual set up cost?

***Please do NOT use handwriting***

Answer 1

Answer:

(a)

Given data,

D = 10000,

Cs = $100

Ch = $1

d = 50 units

p = 100 units

Now the calculations can be done by using the given formula which is as follows

Q = (sqrt((2*D*Cs)/Ch(1-(d/p))))

Now substitute the known values in the above formula then

Q = sqrt((2*10000*100)/1(1-(50/100)))

Q = sqrt(4000000)

Q = 2000

(b)

Here number of orders per year is given as follows

i.e.,

No. of orders = D/Q

Substitute known values in above formula

Number of orders = 10000/2000

N = 5

Hence number of orders per year is 5