Super Furniture Ltd produces sofas.Demand is 6500 sofas per year.Each production run costs $2250 to set up.Storage costs are $42 per sofa per year.What is the optimal number of runs per year?

Question

Quizplus · Accepted Answer

The optimal number of production runs per year can be found using the Economic Order Quantity (EOQ) model formula for production, which is $\sqrt{\frac{2DS}{H}}$, where $D$ is the demand, $S$ is the setup cost per run, and $H$ is the holding cost per unit per year. Plugging in the values: $\sqrt{\frac{2*6500*2250}{42}} \approx 1375.49$ units per run. To find the number of runs per year, divide the total demand by the units per run: $6500 / 1375.49 \approx 4.72$. Since the number of runs must be an integer, and none of the provided options match this calculation directly, it seems there has been a mistake in the calculation interpretation or in the options provided. Given the options, none directly match the typical calculation result, suggesting a need to reevaluate the answer based on the provided choices and the correct application of the EOQ formula.

Super Furniture Ltd Produces Sofas