Question

The Dine Corporation is both a producer and a user of brass couplings. The firm operates 220 days a year and uses the couplings at a steady rate of 41800 per year. Couplings can be produced at a rate of 350 per day. Annual storage cost is $3 per coupling, and machine setup cost is $72 per run. How often the firm starts production? (in days) How many days in a cycle the firm is producing the products? How many days in a cycle the firm doe not produce any product? How much is the total annual inventory-related costs?

Answer 1

Economic Production Quantity is the number of unit that is added to the inventory which minimize the total inventory cost. It maintain a balance between ordering costs and carrying costs.