Problem 7-30 Bryson Carpet Mills produces a variety of different carpets. Changi
ID: 363884 • Letter: P
Question
Problem 7-30 Bryson Carpet Mills produces a variety of different carpets. Changing from production of one carpet to another involves a setup cost of $3,500. Annual demand for this style is 195,000 yards. Bryson Carpet Mills produces carpet 300 days per year. The production process s most efficient when 8,50 yards per day are produced at a cost of S450 per ar Inventor car ng costs estimated at 15 percent annual . What should be the production order quantity? (Round up your answer to the next whole number.) order qExplanation / Answer
Annual demand (D) = 195000
Setup cost (S) = 3500
Holding cost (H) = 15% of $4.50 = $0.675
Demand rate (d) = D / number of days in a year = 195000/300 = 650
Production rate (p) = 8500
Production order quantity = sqrt of {2DS / H[1 - (d /p)]}
= sqrt of {(2x195000x3500)/0.675[1-(650/8500)]}
= sqrt of {1365000000 / (0.675 x 0.924)}
= sqrt of (1365000000/0.6237)
= 46781.96 or rounded to 46782 yards