A food processor uses approximately 29,730 glass jars a month for its fruit juic

Question

A food processor uses approximately 29,730 glass jars a month for its fruit juice product. Because of storage limitations, a lot size of 4,000 jars has been used. Monthly holding cost is 18 cents per jar, and reordering cost is $60 per order. The company operates an average of 20 days a month.

What monthly penalty is the company incurring by its present order size?

A food processor uses approximately 29,730 glass jars a month for its fruit juice product. Because of storage limitations, a lot size of 4,000 jars has been used. Monthly holding cost is 18 cents per jar, and reordering cost is $60 per order. The company operates an average of 20 days a month.

Explanation / Answer

to order every other day ordering quantity = 29730/10 = 2973

let oordering cost = O

for efficient 2973 = sqrt(2*29730*O/.18)

O = (2973^2)*.18/(2*29730) = 26.75

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