Question

A shop that makes candles offers a scented candle, which has a monthly demand of 400 boxes. Candles can be produced at a rate of 36 boxes per day. The shop operates 20 days a month. Assume that demand is uniform throughout the month. Setup cost is $60 for a run, and holding cost is $2 per box on a monthly basis. Determine the economic production quantity.

Answer 1

Answer:232 boxes

Explanation:

Answer 2

Answer:

Economic Production Quantity = 233.55 boxes per month =234 Boxes

Explanation:

EPQ = $\sqrt{\frac{2KD}{h(1-x)} }$

K= Set up cost = $60

D =Demand rate = 400

H= holding cost = $2

x= Demand Rate / Production Rate = 400/ (36*20) =0.56

substitute values into formula

EPQ = $\sqrt{\frac{2*60*400}{2(1-0.56)} }$

        = 233.55 Boxes per month