Question

A firm wants to develop a level material use schedule based on the following data. What should be the setup cost? Desired lot size: 60 Annual demand: 40,000 Holding cost: $20 per unit per year Daily production rate: 320 Work days per year: 250

Answer 1

Answer:

$0.45

Explanation:

Given that

Desired lot size = 60

Annual demand = 40000

Holding cost = 20 per unit

Daily production rate = 320

Workdays per year = 250

Recall that

S = (Q^2 H[1 - d/p])/ 2d

Where S = setup cost

D = annual demand

Q = order quality

P = daily production

Seeing that daily demand is not given. We find d

d = 40000/250 = 160

Therefore

S = [60^2 20( 1 - 60/320)] / 2 × 40000

S = 3600 20 ( -1.12)/ 80000

S = $0.45

Answer 2

A firm can develop a level of material. The setup cost is $0.45

What is the Holding cost?

The Desired lot size is = 60

Then Annual demand is = 40000

After that Holding cost is = 20 per unit

Then Daily production rate is = 320

The Workdays per year is = 250

Now, S is = (Q^2 H[1 - d/p])/ 2d

Where S is = setup cost

Then D is = annual demand

After that Q is = order quality

Then P is = daily production

Now we Seeing that daily demand is not given. We can find d

d is = 40000/250 = 160

Then S = [60^2 20( 1 - 60/320)] / 2 × 40000

After that S = 3600 20 ( -1.12)/ 80000

Therefore, S = $0.45

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