A publishing company sells 450 comma 000 copies of certain books each year. It costs the company $ 1 to store each book for a year. Each time it must print additional copies, it costs the company $ 1 comma 000 to set up the presses. How many books should the company produce during each printing in order to minimize its total storage and setup costs?

The company produce 30,000 books during each printing in order to minimize its total storage and setup costs.

Explanation:

The quantity that minimizes total storage and setup costs is known as Economic Order Quantity, in this case it is called the Optimum Batch Quantity.

Optimum Batch Quantity = √ ((2 * Annual demand * Setup cost per process) / Holding Cost per book.)

= √ ((2 * 450,000 * $1,000) / $1)

= 30,000

Conclusion:

The company produce 30,000 books during each printing in order to minimize its total storage and setup costs.