Purchase Solution

Calculating optimal size of production & inventory costs

Not what you're looking for?

Ask Custom 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 for about 12,000 flashing lights per year and has the 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 size of the production run?
b) What is the average holding cost per year?
c) What is the average setup cost per year?
d) What is the total cost per year, including the cost of the lights?

Purchase this Solution
Solution Summary

Solution describes the steps to calculate optimal size of production and annual inventory costs.

Solution Preview

a) What is the optimal size of the production run?
Annual Demand=D=12000 units
Annual Holding cost=Ch=0.10 dollar
Setting up Cost=Co=50 dollar
Optimal size of production= (2*D*Co/Ch)^0.5 =(2*12000*50/0.10)^0.5= 3464 units

b) What is ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • Calculating optimal production batch size

    414616 Calculating optimal production batch size 1. Jim's Knives manufactures knives for a certain retail store. His skilled workers can produce 10 knives a day of their best-selling knife (known as Bowie knife).

  • Kanban Card-Inventory

    inventory costs, reducing wastage and achieving optimal production levels.

  • Calculating Production Runs

    169062 Calculating Production Runs Details: You have just met with the Director of Purchasing. He has been attempting to reduce his costs by placing fewer, but larger, orders for raw materials.

  • EOQ

    It indicates the optimal order size that minimizes total variable costs required to order and hold inventory. The model was originally developed by F. W. Harris in 1913, though R. H. Wilson is credited for his early in-depth analysis of the model.

  • Calculating optimal batch size for Channel coordination

    73937 Calculating Optimal Batch Size for Channel Coordination A manufacturer of explosive gases is facing the following costs: Set up cost: $2500 Holding cost: $2 Production cost: $0.5 Whole sale price: $0.75 Total demand:

  • Calculate the EOQ/ELS for the following two cases. How large should the standard order size be for this product?

    Order size =1000 units So there are 15000/1000=15 order per year Ordering cost = 15*82 = $1230 Inventory holding cost = 0.5*1000*16 = $8000 Total cost of inventory = 1230+8000=$9230 Savings from optimal policy = 9230-6272.50 = 2957.50 Finished

  • Calculating the EOQ and inventory costs

    Number of production runs=D/EPR=2500/325=7.69 Annual set up cost=Number of production runs*S=7.69*25=192.25 (f) Given the optimal production run size, what is the total annual inventory cost?

  • Operation Management problem.

    The optimal ordering size for EOQ for the paint is determined.

  • Kroft Foods: Operation Management

    The annual cost of carrying a pound of cheese in a refrigerated storage area is $12. Determine the optimal order size and the minimum total annual inventory cost. Dear Customer, I have completed and attached the solution.

View More Related Solutions