A company manufactues a component for one of its products. It used 6000 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 per year. The company can produce the units at the rate of 5000 per month. What is the economic batch quantity that should be manufactured each time?
6000 2000 365 1897
The answer is 2000. Can you please explain? I do not understand how to count 600 in the EBQ?