An automotive part manufacturer can produce at a rate of 5000 units per day. It supplies the parts to a local Auto assembly plant at a rate of 800 units per day. The cost to prepare the equipment for producing the part is $50. Annual holding cost is $40 per unit. The factory operates 280 days a year. (Round up the final answers to the nearest whole number.) What is the optimal production run quantity? (Do not round intermediate calculations.) 49 249 817 1024 None of the above

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Business

Bianca Schwartz

16 March, 00:01

An automotive part manufacturer can produce at a rate of 5000 units per day. It supplies the parts to a local Auto assembly plant at a rate of 800 units per day. The cost to prepare the equipment for producing the part is $50. Annual holding cost is $40 per unit. The factory operates 280 days a year. (Round up the final answers to the nearest whole number.) What is the optimal production run quantity? (Do not round intermediate calculations.) 49 249 817 1024 None of the above

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Krish Crosby · Answer 1

Optimal production run = 816 units per run

Explanation:

The optimal production run is the economic batch units that minimizes the balance of set-up cost and holding cost. It can be determined by adjusting the economic order quantity (EOQ) model for gradual replenishment,

EBQ = √ (2 * Co * D) / Ch (1-D/R)

EBQ - Economic / optimal production run

Co - set-up cost per run

Ch - holding cost per unit per annum

D - Annual Supply - 9800 * 280

Production rate per day-5000

Optimal production run =

√ (2*50 * 800*280) / (40 * (1-800/5000))

=816.4965809

Optimal production run = 816 units per run