Solve using ExcelQM Jan Gentry is the owner of a small company that produces ele
ID: 399114 • Letter: S
Question
Solve using ExcelQM
Jan Gentry is the owner of a small company that produces electric scissors used to cut fabric. The annual demand is 8,000 scissors, and Jan produces the scissors in batches. On average, Jan can produce 150 scissors per day, and during the production process, demand for scissors has been about 40 scissors per day. The cost to set up the production process is $100, and it costs Jan 30 cents to carry one pair of scissors for one year. How many scissors should Jan produce in each batch?
Explanation / Answer
Given information
The optimal production quantity Qp is given by
Qp = sqrt ( 2DS / H*(1-d/p) )
Thus we need to produce
Qp = sqrt ( 2*8000*100 / 0.15*(1 – 40/150) )
Qp = sqrt ( 1600000 / 0.15*0.74 )
Qp = sqrt ( 1600000 / 0.11 ) = 3813.85
Rounding the value we have 3814 units per batch we need to produce in order to minimize the overall cost of holding inventory and setting up the machine.