The Wood Valley Dairy makes cheese to supply to stores in its area. The dairy can make 454 pounds of cheese per day (355 days per year), and the demand at area stores is 62 pounds per day. Each time the dairy makes cheese, it costs $295 to set up the production process. The annual cost of carrying a pound of cheese in a refrigerated storage area is $1.01. Determine the minimum total annual cost.

$245,277

Explanation:

The dairy makes 454 pounds per day of which only 62 pounds is sold, thus the extra pounds of cheese per day are (454-62) = 392.

Now, the dairy operated 355 days a year, hence the annual cost of storage is,

(355 * 392) * $1.01 => $140,552.

Now the setup cost is $295 a day, so the annual would be,

(295 * 355) => $104,725.

Hence the minimum total annual costs will be = 140552+104725 = $245,277.

Hope I made myself clear.

Thanks

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