Rolf Steps is the production manager for a local manufacturing firm.This company produces staplers and other items.The holding cost is $2 per unit per year.The cost of setting up the production line for this is $25.There are 200 working days per year.The production rate for this product is 80 per day.If the production order quantity is 200 units, what was the daily demand (rounded to the nearest whole unit)?
A)6 units
B)7 units
C)8 units
D)9 units

Question

Quizplus · Accepted Answer

To solve for daily demand, we can use the Economic Order Quantity formula:
EOQ = sqrt((2DS)/H)
where D = demand, S = setup cost, H = holding cost per unit per year

Plugging in the given values:
200 = sqrt((2xDx25)/2)
400 = D^2
D = 20

However, we need to find daily demand, so:
Daily demand = 20/200 = 0.1 x 80 = 8 units

Therefore, the best choice is B.

Rolf Steps Is the Production Manager for a Local Manufacturing