A Happy Postage Conmany sells pre-stampd envelopes. The damand for pre-stapmed e

Question

A Happy Postage Conmany sells pre-stampd envelopes. The damand for pre-stapmed envelopes is always 60 a day, and there are 200 working days at the Happy Postage Company. It costs the Happy Postage Company $100 to set-up the produtcion process each time it wasnts to make a batch of pre-stamped envelopes. The Happy Postage Company can produce 150 pre-stamped envelopes in a working day, and it costs the company $0.80 to keep the pre-stamped envelope in inventory for one year. The Happy Postage Company also does all of its inventory according to "Economic Production Quantity" formula. Please answer the following question.

How many times a year does the Happy Postage Company produce pre-stamped envelopes?

Explanation / Answer

Daily Demand, d 60 working days 200 Setup cost,s $        100 Daily Prod Capacity, p 150 Carrying Cost, c $       0.80 EPQ, Q = sqrt((2*s*d)/c) EPQ ,Q 122 units (rounded off) How many times a year does the Happy Postage Company produce pre-stamped envelopes? In one cycle they produce 122 units Annual Demand, D = d * Working days D = 12000 Hence, number of times a year, production happens = D/Q = 98 times (rounded off)

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