Excel produces fire extinguishers.
It makes 30,000 of these fire extinguishers per year. Each extinguisher
requires one handle (assume a 300 day work year for daily usage
rate purposes). Assume an annual carrying cost of Mu 1.50 per
handle, production setup cost of Mu 150, and a daily production
rate of 300. What is the optimal production order quantity?
The equation used differs from the basic
EOQ model by allowing for gradual replenishment, which affects
the average level of inventory.
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