Answer:
setup cost is $7.2
Explanation:
given data
annual demand = 100,000 units
production = 4 hour cycle
d = 400 per day (250 days per year)
p = 4000 units per day
H = $40 per unit per year
Q = 200
to find out
setup cost
solution
We will apply here EPQ formula for find set up cost S that is express as
Q = [tex]\sqrt{\frac{2DS}{H} } \sqrt{\frac{p}{p-d} }[/tex] ............1
200 = [tex]\sqrt{\frac{2*400*250*S}{40} } \sqrt{\frac{4000}{4000-400} }[/tex]
now we take squaring on both sides and we get here
40000 = 5000 × S × 1.11
solve it we get her
S = [tex]\frac{40000}{5000*1.11}[/tex]
S = 7.2
so setup cost is $7.2
