The setup cost to make a carpet is $20 per setup.The holding cost is $2.00 per yard per year,and the annual demand is 12,000 yards.The manufacturing facility operates 300 days,and 120 yards of the carpet are produced per day.Given this information,which of the following statements is true?
A)With an optimum order quantity of 600,the length of the production run in days is 5.
B)With an optimum order quantity of 500,the length of the production run in days is 6.
C)With an optimum order quantity of 400,the length of the production run in days is 7.
D)With an optimum order quantity of 300,the length of the production run in days is 8.

Question

Quizplus · Accepted Answer

BTo find the length of the production run in days, we divide the optimum order quantity by the daily production rate. For option A, 600 yards / 120 yards per day = 5 days. For option B, 500 yards / 120 yards per day = 4.17 days, which rounds up to the nearest whole day as 5 days, not 6 as stated, making my initial inclusion of option B incorrect. The correct answer is solely based on the calculation for option A.

The Setup Cost to Make a Carpet Is $20 Per