A company can produce 100 home computers per day.The setup cost for a production run is $1,000. The cost ofholding a computer in inventory for one year is $300.Customers demand 2,000 home computers per month(assume that 1 month 30 days and 360 days 1 year).What is the optimal production run size? How manyproduction runs must be made each year?

A company can produce 100 home computers per day.The setup cost for a production run is $1,000. The cost ofholding a computer in inventory for one year is $300.Customers demand 2,000 home computers per month(assume that 1 month 30 days and 360 days 1 year).What is the optimal production run size? How manyproduction runs must be made each year?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...

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Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
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