Scary Clows Inc., supplies special makeup cases to a major circus. The circus orders its EOQ of 900 cases every four months from Scary Clowns. Scary Clowns incurs setups costs of $5100 every time it produces these cases, and its annual holding cost per cae is $12. a. how many units should Scary clowns produce in each batch?b. What is the total annual setup and holding cost for Scary Clowns using this policy?

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Asked Oct 29, 2019
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Scary Clows Inc., supplies special makeup cases to a major circus. The circus orders its EOQ of 900 cases every four months from Scary Clowns. Scary Clowns incurs setups costs of $5100 every time it produces these cases, and its annual holding cost per cae is $12. 

a. how many units should Scary clowns produce in each batch?

b. What is the total annual setup and holding cost for Scary Clowns using this policy?

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Expert Answer

Step 1

The clown's manufacturer firm sells its special makeup to the circus. Economic order quantity (EOQ) 900 clowns has been ordered by the circus in every 4 months.
Given,
Setup cost= $5100
Annual Holding cost= $12 per piece
Circus order clowns in every four months. Hence,

Step 2
Annual demand of the prodnct (D) 900x3
-2700 units
Ans 1
Following formula will be used ton find out the number of clowns company prodnced in earh batch
2DS
EOQ (Q
н
Where
EOQ Economic order quantity
S Setup cost
H=Holding cost
On putting the values in the formula,
2DS
EOQ(Q)
н
2x2700x5100
=
12
1514.92- 1515 units
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Annual demand of the prodnct (D) 900x3 -2700 units Ans 1 Following formula will be used ton find out the number of clowns company prodnced in earh batch 2DS EOQ (Q н Where EOQ Economic order quantity S Setup cost H=Holding cost On putting the values in the formula, 2DS EOQ(Q) н 2x2700x5100 = 12 1514.92- 1515 units

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