Business, 28.08.2020 21:01 Meirna

Mason’s Meows is a company that makes cat toys. The company sells 1200 toys per year. The firm incurs a fixed cost of $150 in labor each time it starts up the manufacturing process to begin a new batch of toys. Each toy costs Mason’s Meows $9 to produce. The company's accountant recommends using a holding cost equal to 20% of the cost of the toy, per year. a) What is the optimal batch size, Q? If the company uses batches of size Q, how many times per year, on average, will it start up the manufacturing process?
b) After careful analysis, the inventory team at Mason's Meows realized that the per-unit production cost is smaller if the batch size is larger. In particular, the production cost is $9 per unit for batches of fewer than 400 units and $7.50 per unit for batches of 400 or more units. Now what is the optimal batch size?

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Mason’s Meows is a company that makes cat toys. The company sells 1200 toys per year. The firm incur...

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