USA: +1 (725) 712-1730 
Sign in
DITfun Inc. makes flashing lights for toys. Table 5.1 outlines some data in relation to its product. What is the optimal size of the production run? What is the annual total cost (including cost of goods)?
Expert Answer
Annual Demand (D) = 12000 units
Daily demand (d) = 40 units
Daily Production capacity (p) = 100 units
Holding cost per unit per year (H) = €.10
Setup cost (S) = €50
1.
Optimum size of production run (Q) = ((2*D*S)/(H*(1-(d/p))))^.5
Optimum size of production run (Q) = ((2*12000*50)/(.1*(1-(40/100))))^.5 = 4472.13or 4472 units
2.
Total cost = (D/Q)*S + (Q/2)*H*(1-(d/p))
Total cost = (12000/4472.13)*50 + (4472.13/2)*.1*(1-(40/100))
Total cost = €268.33
*Unit cost of goods are not mentioned.
