Question

race one motors is an indonesian car manufacturer. at its largest manufacturing facility, in jakarta, the company produces subcomponents at a rate of 300 per day, and it uses these subcomponents at a rate of 12,500 per year (of 250 working days). holding costs are $2 per item per year, and ordering (setup) costs are $30 per order. a) what is the economic production quantity?

Answer 1

According to the given information, The Economic Production Quantity (EPQ) is 612.327 units.

Economic Production Quantity = (2AO / H)^(1/2)

Here,

A = Annual Demand = 12,500

O = Ordering cost = $30.00

H = Holding cost = $2.00

Hence,

Economic Production Quantity = (2 × 12,500 × 20 / 2)$^ (^1^/^2^)$ = 612.327 units

• Only in situations where a product's demand is steady throughout the year and where new orders are delivered or produced gradually until the inventory is completely depleted does EPQ apply. Regardless of the quantity ordered, there is a fixed cost associated with each order. Additionally, there is a holding or storage fee for each unit kept in storage.
• In order to reduce the overall cost of buying, shipping, and storing the product, we need to figure out how many units to order of the best possible quantity.

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