Suds's Bottling Company does bottling, labeling, and distribution work for several local microbreweries. The demand rate for Wortman's beer is 600 cases (24 bottles each) per week. Suds's bottling production rate is 2 comma 300 cases per week, and the setup cost is $700. The value of inventory is $11.50 per case, and the annual holding cost is 30 percent of the inventory value. Suds's Bottling Company operates 52 weeks per year. What is the economic production lot size?

Question

contestada

Respuesta :

TomShelby TomShelby · Answer 1 · 2019-07-30T00:50:54+02:00

Answer:

The economic production lot size will be 3,558 cases

Explanation:

We should use the economic order quantity formula

[tex]Q_{opt} = \sqrt{\frac{2DS}{H}}[/tex]

How to Remember:

Demand per year and order cost goes in the dividend.

Holding cost goes in the divisor.

D= annual demand = 600 x 52 = 31,200

S= setup cost = 700

H = Annua holding cost is 30% of invenotry value:

11.50 x 30% = 3.45

[tex]Q_{opt} = \sqrt{\frac{2\times31,200\times700}{3.45}}[/tex]

EOQ =3558