Concept explainers
A
Interpretation: The economic production lot size (ELS) is to be calculated.
Concept Introduction: ELS (economic production lot size) refers to lot size where total cost is minimum on consideration of balance between ordering cost and carrying cost
B
Interpretation: The setup cost and inventory holding cost per annum are to be calculated.
Concept Introduction: Setup is the cost to borne by the company for making ready of machinery to produce a fresh batch of goodsand inventory holding cost refers to costs associated with unsold stock
C
Interpretation: The TBO or cycle length for the ELS should be calculated.
Concept Introduction: TBO orcyclelength for ELS is division of ELS by demand
D
Interpretation: The production time per lot should be calculated.
Concept Introduction:Dividing lot size with production rate is production rate
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