Question

A manufacturer can produce 12000 bearings per day. The manufacturer received an order of 8000 bearings per day from a customer. The cost of holding a bearing in stock is Rs. 0.20 per month. Setup cost per production run is Rs. 500. Assuming 300 working days in a year, the frequency of production run should be

• A. 4.5 days
• B. 4.5 months
• C. 6.8 months
• D. 6.8 days

Answer 1

The correct option is D 6.8 days

$\text{Given: D = 8000 per day; P = 12000 per day}$

$C_h=0.2\text{Rs. per month}$

$C_o=500\text{per production run}$

$EOQ,Q^{\ast }=\sqrt{\frac{2C_{o}D}{C_h(1-\frac{D}{P})}}$

$=\sqrt{\frac{2\times 500\times 8000\times 300}{0.2\times 12(1-\frac{8000}{12000})}}=54772.25$

$\text{Frequency of production run}$

$=\frac{54772.25}{8000}=6.8\text{days}$

$\text{Points to Remember :}$

The frequency of production run is also known as total cycle time. And it is calculated as

$T=\frac{Q^{\ast }}{D}=\frac{1}{N}$

$\text{where, N = Number of orders}$