Question

​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?

Answer 1

Answer:

The economic production lot size will be 3,558 cases

Explanation:

We should use the economic order quantity formula

$Q_{opt} = \sqrt{\frac{2DS}{H}}$

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

$Q_{opt} = \sqrt{\frac{2\times31,200\times700}{3.45}}$

EOQ =3558