28.03.2023 - 08:41

Neilsen Cookie Company sells its assorted butter cookies in containers that have a net content of 1 lb. The estimated demand for the cookies is 900,000 1-lb containers. The setup cost for each product

Question:

Neilsen Cookie Company sells its assorted butter cookies in containers that have a net content of 1 lb. The estimated demand for the cookies is 900,000 1-lb containers. The setup cost for each production run is $491, and the manufacturing cost is $0.58 for each container of cookies. The cost of storing each container of cookies over the year is $0.31. Assuming uniformity of demand throughout the year and instantaneous production, how many containers of cookies should Neilsen produce per production run in order to minimize the production cost? (Round your answer to the nearest whole number.)

Answers (1)
  • Mona
    April 17, 2023 в 05:07
    Neilsen Cookie Company should produce 11,684 containers of cookies per production run to minimize production cost. Explanation: We can use the economic order quantity (EOQ) formula to find the optimal production quantity: EOQ = sqrt((2DS)/H) where D = annual demand, S = setup cost, and H = holding cost per unit. Plugging in the given values, we get: EOQ = sqrt((2 x 900,000 x 491) / 0.31) EOQ ? 11,684 Since we are asked to produce the cookies in 1-lb containers, we should produce the closest whole number to the optimal quantity, which is 11,684. This will minimize the total production cost by balancing the setup cost and holding cost.
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