Ashlee\'s Beach Chairs Company produces upscale beach chairs, Annual demand for
ID: 449323 • Letter: A
Question
Ashlee's Beach Chairs Company produces upscale beach chairs, Annual demand for the chairs estimated at $1,000 units. The frames are made in batches before final the assembly process. Ashlee's final assembly department needs frames at a rate of 20 per week. Ashlee's frame department can produe 25 frames per week. The setup cost is $100/setup, the annual holding cost per frame is $4, ad the cost of prodution $30 a frame. The company operates 50 weeks per year. Find the total cost of the system.
a. $29,400
b.$30,400
c $31,400
d. $35, 400
Explanation / Answer
Total cost = setup cost+ holding cost + product cost
Before finding total cost, we need to calculate EOQ.
EOQ = ( 2DS) / H (1-d/p)
where, D= Annual demand
S = setup cost
H= holding cost
d = weekly demand
p = weekly production
EOQ = ( 2*1000*100) / 4(1-20/25)
= 500 units
Now put this as a Q in Total cost formula,
TC = D/Q*S + Q/2 * H + PD
where P = product cost = $ 30
TC = 1000/500 * 100 + 500/2 * 4 + 30*1000
= 200 + 1000 + 30000
= 31,200
Option C is correct answer.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.