Your company manufactures and sells custom hubcaps as an aftermarket accessory f
ID: 354025 • Letter: Y
Question
Your company manufactures and sells custom hubcaps as an aftermarket accessory for car enthusiasts. 2 with an average daily demand of 4 units but you produce 8 units per day. Your set up costs are $10 and your holding costs are S0.50 per unt per year Your company wants you to determine the optimum production quantity to minimize total costs. Your company operates 250 days per year 1 You have an annual demand of 1,000 units 3 6 a. Determine the EPQ (round to whole number) 9 b. Based on your answer in a. determine the cycle time (the time between setups of consecutive runs) 10 12 C. Based on your answer in c., determine the run time (production phase of the cycleExplanation / Answer
To be calculated:
a) Economic production quantity (EPQ)
b) Cycle time
c) Run time
Given values:
Annual demand, D = 1,000 units
Average daily demand, d = 4 units per day
Average daily production, p = 8 units per day
Set-up costs, S = $10
Holding costs = $0.50 per unit per year
Number of days in a year = 250 days
Solution:
(a) The Economic production quantity (EPQ) can be calculated as;
EPQ = 2DS / H (1 - d/p)
where,
D = Annual demand
S = Setup costs
H = Annual holding costs
d = daily demand
p = daily production
EPQ = (2 x 1000 x 10) / 0.50 x (1 - 4/8)
EPQ = 20000 / 0.25
EPQ = 282.84
EPQ = 283 units
(b) Cycle time is calculated as;
Cycle time = EPQ / d
where,
EPQ = Economic production quantity
d = daily demand
Cycle time = 283 / 4
Cycle time = 70.75 or 71
Cycle time = 71 days
(c) Run time is calculated as;
Run time = EPQ / p
where,
EPQ = Economic production quantity
p = daily production
Run time = 283 / 8
Run time = 35.38
Run time = 35 days
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