Question

Dan Bumblauskas is the owner of a small Iowa company that produces electric knives used to cut fabric. The annual demand is for 10 comma 500 ​knives, and Dan produces the knives in batches. On​ average, Dan can produce 190 knives per​ day; during the production​ process, demand has been about 70 knives per day. The cost to set up the production process is ​$85​, and it costs Dan ​$1.10 to carry a knife for 1 year. How many knives should Dan produce in each​ batch?

Answer 1

Answer:

1,012.36 knives produced in each month

Explanation:

Data provided in the question

Annual demand = 10,500

Ordering cost = $85

Holding cost = $1.10

Daily demand = 70 knives per day

Production knives per day = 190 knives

Based on the given information, we need to apply the formula which is shown below:$Economic\ order\ quantity = \sqrt{\frac{2\times annual\ demand \times ordering\ cost}{holding\ cost} \times 1 - \frac{daily\ demand}{production}$

$Economic\ order\ quantity = \sqrt{\frac{2\times 10,500 \times\ 85}{\ 1.10} \times 1 - \frac{70}{190}$

= 1,012.36 knives produced in each month

We simply applied the above formula to find out the knives produced in each batch