Bryson Carpet Mills produces a variety of different carpets. Changing from produ

Question

Bryson Carpet Mills produces a variety of different carpets. Changing from production of one carpet to another involves a setup cost of $1,700. Annual demand for this style is 141,000 yards. Bryson Carpet Mills produces carpet 300 days per year. The production process is most efficient when 6,700 yards per day are produced at a cost of $6.50 per yard. Inventory carrying cost is estimated at 15 percent annually.

What should be the production order quantity? (Round up your answer to the next whole number.)

Production order quantity ________ yards

Explanation / Answer

average daily demand . = 141000/300 = 470 yards/day

Production order quantity

= sqrt( 2 * 141000 * 1700/0.15*6.5*[1-470/6700])

= 22995 yards

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