Neilsen Cookie Company sells its assorted butter cookies in containers that have a net content of 1 lb. The estimated demand for the cookies is 1,000,000 1-lb containers. The setup cost for each production run is $250, and the manufacturing cost is $.20 for each container of cookies. The cost of storing each container of cookies over the year is $.80.

Assuming uniformity of demand throughout the year and instantaneous production, how many containers of cookies should Neilsen produce per production run in order to minimize the production cost?

Question

Neilsen Cookie Company sells its assorted butter cookies in containers that have a net content of 1 lb. The estimated demand for the cookies is 1,000,000 1-lb containers. The setup cost for each production run is $250, and the manufacturing cost is $.20 for each container of cookies. The cost of storing each container of cookies over the year is $.80.
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Assuming uniformity of demand throughout the year and instantaneous production, how many containers of cookies should Neilsen produce per production run in order to minimize the production cost?
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Quizplus · Accepted Answer

The Answer of Neilsen Cookie Company sells its assorted butter cookies in containers that have a net content of 1 lb. The estimated demand for the cookies is 1,000,000 1-lb containers. The setup cost for each production run is $250, and the manufacturing cost is $.20 for each container of cookies. The cost of storing each container of cookies over the year is $.80.
​
Assuming uniformity of demand throughout the year and instantaneous production, how many containers of cookies should Neilsen produce per production run in order to minimize the production cost?
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Neilsen Cookie Company Sells Its Assorted Butter Cookies in Containers