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Alyce operates a factory that manufactures pencil boxes which she sells to stationery store Additional information: Annual demand is 1 million pencil boxes per year Setup cost is $5000 per batch Holding cost is $3 per year for each pencil boxes Maximum production capacity is 2 million pencil boxes per year Currently, pencil boxes are manufactured in 10 batches. 1 a) Find the optimum production quantity that Alyce should produce to minimize ber costs. Economic Batch Quantity = v(2 * 5000* 1,000,000)/(3 x (1-41,000,000/2,000,000)) = (10,000,000,000/1.5) - 81,650 b) Calculate the current annual holding cost and setup cost. Batch Quantity Annual Demand = Number of batches - 1,000,000 - 10 - 100,000 units Annual Holding Cost = (100.000/2) * 3 * (1-(1,000,000 2.000.000)) - $75,000 Setup Cost - 10 x 5000 - $50,000 Total Current Cost = ($75,000 + $50,000) $125,000 c) Draw a diagram showing stock level for the first batch, assume 1 year has 250 working days Alyce operates a factory that manufactures pencil boxes which she sells to stationery store Additional information: Annual demand is 1 million pencil boxes per year Setup cost is $5000 per batch Holding cost is $3 per year for each pencil boxes Maximum production capacity is 2 million pencil boxes per year Currently, pencil boxes are manufactured in 10 batches. 1 a) Find the optimum production quantity that Alyce should produce to minimize ber costs. Economic Batch Quantity = v(2 * 5000* 1,000,000)/(3 x (1-41,000,000/2,000,000)) = (10,000,000,000/1.5) - 81,650 b) Calculate the current annual holding cost and setup cost. Batch Quantity Annual Demand = Number of batches - 1,000,000 - 10 - 100,000 units Annual Holding Cost = (100.000/2) * 3 * (1-(1,000,000 2.000.000)) - $75,000 Setup Cost - 10 x 5000 - $50,000 Total Current Cost = ($75,000 + $50,000) $125,000 c) Draw a diagram showing stock level for the first batch, assume 1 year has 250 working days

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