Answer to Question #283044 in Management for Abi

Question

While manufacturing a certain product within the company, it incurs set-up cost per set up is Rs.300 and carrying cost per unit per year is Rs.15 . Next year demand for the product is predicted as 15000 units. Determine the economic batch quantity and it's cycle time if rate of production is 25000 units per year

Answer 1

While manufacturing a certain product within the company, it incurs set-up cost per set up is Rs.300 and carrying cost per unit per year is Rs.15 . Next year demand for the product is predicted as 15000 units. Determine the economic batch quantity and it's cycle time if rate of production is 25000 units per year

 

Answer:

-Economic batch quantity=square root of (2*Cs*D) /(Cn(1-D/P))}

-Cs is the setup cost of a batch

-D is the annual demand

-P is the annual production capacity

-Cn is the annual cost of holding one unit of finished inventory

 

=Square root of {2*300*15000) / 15(1-15000)/25000))}

=Square root of 9000000/-224985)/25000

=Square root of 9000000/89.994

=Square root of 100.007

EBQ=10.000