Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights
ID: 2442848 • Letter: R
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 12,000 flashing lights per year and has the capability of producing 100 per day. Setting up the light production costs $ 50. The cost of each light is $ 1. The holding cost is $ 0.10 per light per year.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?
Explanation / Answer
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 12,000 flashing lights per year and has the capability of producing 100 per day. Setting up the light production costs $50. The cost of each light is $1. The holding cost is $0.10 per light per year.
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?
C----Cost of carrying one unit in inventory for one year.
D--- Annual demand for a material S----
Set-up
cost $ 0.1 12000 $ 50
EOQ = = 3464.101615
say Economic Order Quantity = 3465
Inventory carrying cost per year = $ 173.205
Set-up cost per year= $ 173.205
Total inventory ( setup + carry) cost= $ 346.410
Cost of lights = Total inventory cost+ setup cost + cost of material = =$ 12346
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