Question

What is the total setup cost per year for the computer production facility if the economic order quantity is 250 units and the setup costs are $100 per order, considering the daily demand rate of 6 and the daily production rate of 20?

a) $400
b) $500
c) $600
d) $800

Answer 1

The total setup cost per year for the computer production facility is $600.

Step-by-step explanation:

To calculate the total setup cost per year, we need to consider the economic order quantity and the setup costs. The economic order quantity is given as 250 units, and the setup costs are $100 per order.

The number of orders per year can be calculated by dividing the total demand (daily demand rate * number of production days) by the economic order quantity. In this case, the daily demand rate is 6 and the daily production rate is 20. So, the total demand per year is 6 * 20 * 365.

Finally, the total setup cost per year is obtained by multiplying the number of orders per year by the setup cost per order. By performing the calculations, we find that the total setup cost per year is $600, which corresponds to option c).