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The Friendly Sausage Factory (FSF) can produce hot dogs at a rate of 5,000 per day....

The Friendly Sausage Factory (FSF) can produce hot dogs at a rate of 5,000 per day. FSF supplies hot dogs to local restaurants at a steady rate of 230 per day. The cost to prepare the equipment for producing hot dogs is $66. Annual holding costs are 45 cents per hot dog. The factory operates 294 days a year.


a.

Find the optimal run size. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

The answer of 4543 is not correct (our notes allow us to verify if a number is right) and this is not correct

  Optimal run size
business   Operations-Management   
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Answer #1

Production rate(p) = 5000 per day

Demand rate(d) = 230 per day

Number of days per year = 294 days

Annual demand(D) = d x number of days per year = 230 x 294 = 67620 hot dogs

Set up cost(S) = $66

Holding cost (H) = 45 cents = $0.45

A) Optimum run size(Q) = √ {2DS / H [1-(d/p)]}

= √{(2x67620x66) /0.45[1-(230/5000)]}

= √[8925840/0.45(1-0.046) ]

= √ [8925840/(0.45 x 0.954)]

= √(8925840/0.4293)

= √20791614.2557

= 4560 hot dogs

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