The Chrysler Belvedere Truck Plant is attempting to minimize production costs.Over one month, 3,200 fenders are needed on the production line, which runs continuously.If it costs $400 to set up the stamping press to produce fenders and $1 per month to store produced fenders, how many times should the stamping press be run per month?
A)Once
B)Twice
C)3 times
D)4 times
E)5 times

Question

Quizplus · Accepted Answer

To minimize production costs, the company needs to balance the cost of setting up the stamping press to produce fenders with the cost of storing produced fenders.

If the stamping press is run once to produce all 3,200 fenders, the setup cost would be $400, but the total storage cost over the month would be $3,200 ($1 per fender per month x 3,200 fenders).

If the stamping press is run twice to produce 1,600 fenders each time, the total setup cost would be $800 ($400 per setup x 2 setups), but the total storage cost over the month would be only $1,600 ($1 per fender per month x 1,600 fenders produced at each setup).

Therefore, running the stamping press twice would minimize production costs.

The Chrysler Belvedere Truck Plant Is Attempting to Minimize Production