Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights

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 11,600 flashing lights per year and has the capability of producing 100 per day. Setting up the light production costs $51. The cost of each light is $0.95. The holding cost is $0.05 per light per year. a) What is the optimal size of the production run? 6,211 units (round your response to the nearest whole number). b) What is the average holding cost per year? $(round your response to two decimal places)

Explanation / Answer

Average holding cost = (Optimum sizxe of the production/2)*Holding cost per year

= (6211/2)*0.05

=3105.50*0.05

= $155.27

Average holding cost =  $155.27

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