Question

A company manufactures bearings at the rate of 100 per day. The demand occurs at the rate of 75 per day. The production set up cost is Rs. 600 per set up and holding cost is Rs. 1 per unit item per day. The economic lot size for one run (Assuming that shortages are not permitted)

• A. 1200
• B. 1000
• C. 600
• D. 250

Answer 1

The correct option is C 600

$P=100,d=75,C_s=Rs600,C_h=Rs1$

$EOQ=\sqrt{\frac{2\times C_s\times d}{C_h}}\times \sqrt{\frac{P}{P-d}}$

$=\sqrt{\frac{2\times 600\times 75}{1}}\sqrt{\frac{100}{25}}=600$