Assume that your widget manufacturing company has a total annual demand of N widgets per year...

70.2K

Verified Solution

Question

Economics

Assume that your widget manufacturing company has a totalannual demand of N widgets per year evenly distributed across theyear. Each widget cost $b dollars in material and manufacturingcosts to make. Every time you do a production run to make somewidgets, you incur a set-up cost of P dollars. Any widgets awaitingsale must be stored and thus incur an average storage fee of cdollars per widget per year. Let x be the size of each productionrun (i.e. x is the number of widgets per production run).
Write a cost function C(x) and explain each term in theequation and how it was determined.
Write down any constraints on the allowable values of x.
Determine a formula for the value of x that minimizes totalannual cost. Show all of your work.
Prove that your formula actually corresponds to the globalminimum cost.
Write down a formula for the number of production runs per yearas a function of x.

Answer & Explanation Solved by verified expert

3.7 Ratings (522 Votes)

Monetary Group Amount EBQ Definitions Monetary Group Amount EBQ otherwise called the ideal generation amount EPQ is the request size of a creation clump that limits the absolute expense Clarification Clump generation is a procedure which is ordinarily utilized today for conveying the all out creation in a progression of little bunches as opposed to mass delivering in one go Here and there the generation of products in bunches is vital in light of the fact that for instance certain gear utilized in assembling for example colors may wear out and need substitution before the generation can run once more Group generation might be alluring in different cases too For instance where the articles being delivered are shortlived the whole generation necessity for state a year cant be fabricated in seven days as it may make the merchandise lapse after some time Bunch creation likewise lessens the danger of oldness as any minor changes required in the particular of products for example size shading and so on can be made in future clumps as per the input got from clients or retailers as opposed to delivering everything in one go and seeking after the best Though EOQ is reasonable for deciding the request size when the parts materials or completed merchandise are fit to be conveyed by outside providers when the request is put EBQ is utilized to decide the size of a generation run for example clump size when the assembling happens inside and any crude materials or parts required for creation are either procured inside or are provided gradually by different organizations as per the generation prerequisite Equation Monetary Bunch Quantity 2 x Cs x D Ch1 DP Where Cs is the arrangement cost of a cluster D is the yearly request P is the yearly generation limit Ch is the yearly cost of holding one unit of completed stock The equation for computing EBQ is fundamentally the same as EOQ with one eminent distinction in the denominator The expense of holding in EBQ recipe is diminished by the measure of stock that will be created and sold around the same time accordingly not adding to the yearly See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member