Radovilsky Manufacturing Company, in Hayward. California, makes flashing lights
ID: 468998 • 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, 200 flashing lights per year and has the capability of producing 105 per day. Setting up the light production costs $51. The cost of each light is $1 00. The holding cost is $0.15 per light per year. What is the optimal size of the production run? 3679.78 units (round your response to the nearest v/hole number). What is the average holding cost per year? $ (round your response to two decimal places).Explanation / Answer
a: What is the optimal size of the production run?
Order size = 12,200 units per year
Number of working days = 300
Required production per day = 12,200/300 = 41 units
b: What is the average holding cost per year?
The holding cost per light per year = $0.15
If the company produces at 100% capacity i.e., it produces 300 days at 105 units per day
= 300x105 = 31,500 units per year.
Since holding cost per light per year is $0.15 it will not change.
Hence, the average holding cost per year = $0.15
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