A production facility is trying to determine the best batch size for an item that is produced intermittently. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What is the best batch size for this item?

Question

Business

Kristen Avery

3 October, 06:06

A production facility is trying to determine the best batch size for an item that is produced intermittently. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What is the best batch size for this item?

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Answers (1)

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Mckayla Aguirre · Answer 1

The best batch size for this item is 400 units.

Explanation:

As given Annual demand (D) = 1000 units, Carrying cost (H) = $10 per unit, set up cost (S) = $400.

As per the production order model formula will be:

/sqrt{2}D*S/H[1-d/p]}.

d for week=1000/50

=20. p per day

=40 units/7 days.

=5.71

d per day = 20/7

=2.85

Therefore on applying all these:/sqrt{}2*1000*400/10[1-2.85/5.7.

on solving this we will get 400 Units

Therefore, The best batch size for this item is 400 units.