Question

The assumptions of the production order quantity model are met in a situation where annual demand is 3650​ units, setup cost is​ $50, holding cost is​ $12 per unit per​ year, the daily demand rate is 20 and the daily production rate is 100. What is the production order quantity for this​ problem?

Answer 1

Answer:

156

Explanation:

Production order quantity can be calculated by: $\sqrt{2*K*D / h*(1-x)}$

Where, K = Setup Cost , D = Annual demand, H = Holding cost , x = d/p (daily demand rate/ daily production rate).

Production order quantity = $\sqrt{2 * 50 *3650/12 * (1 - 20/100)}$

Production order quantity = $\sqrt{2 * 50 * 3650/12 * (1 - 0.2)}$

Production order quantity = $\sqrt{2 * 50 * 3650/12 * 0.8}$

Production order quantity = $\sqrt{2 * 50 * 304.17 * 0.8}$

Production order quantity = $\sqrt{24333.6}$

Production order quantity = 155.9923075026458

Production order quantity = 156 (rounding off)

So, the production order quantity for this​ problem is 156