Omnivent Inc makes serial decorative lights The firm operate

Omnivent Inc. makes serial decorative lights. The firm operates its production facility for 300 days per year. It has orders for 12,000 serial lights per year and has the capability of producing 100 per day. The setting up of the serial light production costs $50.The cost of each serial light is $1. The holding cost is $0.10 per light per year. What is approximately the EPQ?

Solution

EPQ=( 2*D*Co*P/ Ci * P-D)2

=(2*12,000 units * $50. * 30,000 units / $0.10 * 30,000 units - 12,000 units)2

=(36,000,000,000 / $0.10 * 18,000)2

=(20,000,000)2

=4,472 approximately EPQ

EPQ

D= Annual Demand for the product

P=Annual rate of production (100 per day * 300 working day =30,000 units)

Co= set up cost

Ci= Inventory holding cost per unit

2= is used as square