The mythical Three Floyds Brewery in Munster, Indiana makes a beer called Zombie Dust, which it sells in large bottles to pubs and stores in the Midwest. The setup cost of brewing and bottling a batch of beer is $1,800 per setup. The holding cost of storing a bottle of beer is $2.50 per year. The annual demand for Zombie Dust is 20,000 bottles. Three Floyds Brewery can brew and bottle beer at the rate of 400 bottles per day. The brewery operates 250 days per year and currently produces Zombie Dust in batches of 10,000 bottles.
a. What is the annual holding and setup cost of their current production schedule?
b. What is the economic production quantity (EPQ)?
c. What is the cost difference between the current production schedule and the EPQ?
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The mythical Three Floyds Brewery in Munster, Indiana makes a beer called Zombie Dust, which it sell...
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