Assume that you are reviewing the ERPS decision associated with a production ope
ID: 431386 • Letter: A
Question
Assume that you are reviewing the ERPS decision associated with a production operation where P=4000 units per year, D=2000 units per year, S=$400 per setup, and H=$2.50 per unit per year. Currently the company produces 500 units per setup. Are you satisfied with the current production quantity? Or, do you want to recommend changing the current production size? Why or why not? Explain clearly by showing all your work. Your work should include a comparison of the annual total costs of the current policy and the recommended policy. Assume that 1 year=365 days.
Explanation / Answer
Answer:
Explanation:
Cost for current 500 unit ordering:
Cost for optimal ordering (800 units):
Hence costs are significantly different.