Question

An automotive part manufacturer can produce at a rate of 5000 units per day. It supplies the parts to a local Auto assembly plant at a rate of 800 units per day. The cost to prepare the equipment for producing the part is $50. Annual holding cost is $40 per unit. The factory operates 280 days a year. (Round up the final answers to the nearest whole number.) What is the optimal production run quantity? (Do not round intermediate calculations.) 49 249 817 1024 None of the above

Answer 1

Optimal production run= 816 units per run

Step-by-step explanation:

The optimal production run is the economic batch units that minimizes the balance of set-up cost and holding cost. It can be determined by adjusting the economic order quantity (EOQ) model for gradual replenishment ,

EBQ = √(2× Co× D)/Ch(1-D/R)

EBQ- Economic /optimal production run

Co- set-up cost per run

Ch- holding cost per unit per annum

D- Annual Supply- 9800× 280

Production rate per day-5000

Optimal production run =

√(2×50× 800×280)/(40×(1-800/5000))

=816.4965809

Optimal production run= 816 units per run