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This one also Sir..am having problem with the set up cost..Please help..Thanks
A company manufactures a component for one of its products. It uses 6,000 of these components evenly throughout the year. Each component costs $20 to manufacture. In addition there is a cost of $600 to set-up the machines each time a batch of these components is manufactured. The holding cost per unit is $2. The company can produce the components at the rate of 5,000 per month.
What is the economic batch quantity that should be manufactured each time?
The set-up cost is given to you in the question – is is $600 !
For the formula (which is given on the formula sheet) you also need to know the demand per year – this is 6,000
The holding cost per unit per year – this is $2
And the rate of production per year – this is 60,000 (12 x 5000).
Then it is just using your calculator 🙂
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