Piedmont Hospital decides to go into the glove manufacturing business for themselves, considering their annual demand for
Question:
Piedmont Hospital decides to go into the glove manufacturing business for themselves, considering their annual demand for surgical gloves is 25,000 pairs. It costs $25 to set up their production equipment and personnel, and 500 pairs can be produced each day. With their limited storage space it is estimated that it costs $0.05 to hold one pair of gloves in inventory for a year. Assuming 250 working days per year, perform a Production Order Quantity analysis. 2a) What ORDER SIZE will minimize total cost? 2b) If you build the OPTIMAL PRODUCTION QUANTITY, how many WORKDAYS will it take to produce that quantity? 2c) Comparing the results of the ECONOMIC ORDER QUANTITY in problem 1 vs. the PRODUCTION ORDER QUANTITY in problem 2, which is the less expensive option for the hospital?
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves