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25 August, 05:15

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

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  1. 25 August, 05:37
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    Answer: set up cost is $-111.6 ~ $ - 112.

    Explanation:

    In determining the set up costs, the formula used is (Q ^ 2 * H[1 - d : P]) : 2 * D

    where;

    Q represents Desired lot size

    H represents Holding Cost

    D represents Annual Demand

    P represents Daily production

    Therefore, (60 ^ 2 * 20[1 - 40,000 : 320] : 2 * 40,000)

    = 72,000[ 1 - 125] : 80,000

    = 72,000[ - 124] : 80,000

    = - 8,928,000 : 80,000

    =$ - 111.6 is the set up cost.
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