Question: Demand for an item is constant at 1,800 units a year. The item can be made at a constant rate of 3,500 units a year.

Demand for an item is constant at 1,800 units a year. The item can be made at a constant rate of 3,500 units a year. Unit cost is 50, batch set-up cost is 650, and holding cost is 30 per cent of value a year. What is the optimal batch size for the item? If production set-up time is 2 weeks, when should this be started?

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