Clear Vision Corporation Clear Vision Corporation manufactures various glass products including a car window.The setup cost to produce the car window is $1,200.The cost to carry a window in inventory is $3 per year.Annual demand for the car window is 12,000 units.
Refer to Clear Vision Corporation.What is the most economical production run (rounded to the nearest unit)?

Question

Quizplus · Accepted Answer

The most economical production run can be calculated using the Economic Production Quantity (EPQ) formula. The EPQ formula is similar to the Economic Order Quantity (EOQ) formula but is used for production runs. The formula is: EPQ = sqrt((2 * Demand * Setup Cost) / Holding Cost). Plugging in the values: EPQ = sqrt((2 * 12000 * 1200) / 3) = 3,098 units.

Clear Vision Corporation Clear Vision Corporation Manufactures Various Glass Products