A manufacturer produces an article in batches of N items. Each production run has a set-up cost
Question:
A manufacturer produces an article in batches of N items. Each production run has a set-up cost of £100 and each item costs an additional £0.05 to produce. The weekly storage costs are a basic rental of £50 plus an additional £0.10 per item stored. Assuming that there is a steady sale of n items per week, so that the average number of items stored is 1/2N, and that, when the store is exhausted, it is immediately replenished by a new production run, show that the weekly cost £K is given by
The weekly demand n is a function of the selling price £p, and
If the manufacturer is able to decide both the batch size N and the price £p, show that a maximum weekly profit is realized where p = 0.3, and find the corresponding values of N, n and P.
Step by Step Answer:
n The proportion of a batch used in a week is so one weeks share of the s...View the full answer
