A company produces and sells 211,600 boxes of t-shirts each year. Each production run has a fixed cost of $400 and an additional cost of $3 per box of t-shirts. To store a box for a full year costs $2. What is the optimal number of production runs the company should make each year? Do not include units with your answer.
Every year, the company produces and sells 211,600 boxes of T-shirts. Each production run has a fixed cost of $400 and an additional cost of $3 per box of T-shirts. Let the number of production runs in a year be P. In order to obtain the optimal number of production runs, construct a cost function as follows.
Then, the number of boxes per each production run becomes
Thus, the Cost function is constructed as
However, there is an inventory cost of a box for a full year that is $2.
Holding cost per year = (ave. i...
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