The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 20 and the daily production rate is 100. What is the production order quantity for this problem?

156

Explanation:

Production order quantity can be calculated by:

Where, K = Setup Cost , D = Annual demand, H = Holding cost , x = d/p (daily demand rate/ daily production rate).

Production order quantity =

Production order quantity =

Production order quantity =

Production order quantity =

Production order quantity =

Production order quantity = 155.9923075026458

Production order quantity = 156 (rounding off)

So, the production order quantity for this problem is 156

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