Radovilsky Manufacturing Company, in Hayward. California. makes flashing lights

Question

Radovilsky Manufacturing Company, in Hayward. California. makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders fo about 12,000 flashing lights per year and hasthe capability of producing 100 per day. Setting up the light production costs $50. The cost of each light is $1 The holding cost is $0.10 per light per year.

a) What is the optimal sizeof the production rn?

b) What is the average holding cost per year?

c) What is the average setup cot per year?

d) What is the total cost per year, including the cost of the lights?

Explanation / Answer

Hi,

Please find the answers as follows:

Part A:

Optimal Size of Production Run = Sqr Root(2*12000*50)/.10*(1-40/100) = Sqr Root(1200000/.06) = 4472.14

Part B:

Average Holding Cost = 4472/2*(.10)*(1-40/100) = 134.16

Part C:

Average Setup Cost = 12000/4472*(50) = 134.16

Part D:

Total Cost = 134.16 + 134.16 + 12000 = 12268.32

Thanks.

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