Montegut Manufacturing Produces a Product for Which the Annual Demand

question 3

Essay

Montegut Manufacturing produces a product for which the annual demand is 10,000 units.Production averages 100 units per day,while demand is 40 units per day.Holding costs are $2.00 per unit per year,and setup cost is $200.00.(a)If the firm wishes to produce this product in economic batches,what size batch should be used? (b)What is the maximum inventory level? (c)How many order cycles are there per year? (d)What are the total annual holding and setup costs?

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Definitions:

Marginal Social Cost

The total cost to society of producing one additional unit of a good or service, including both private costs and externalities.

Marginal Social Benefit

The additional benefit that society gains from consuming an additional unit of a good or service.

Government Intervention

Actions taken by a government to affect or interfere with economic activity, often to correct market failures and promote economic welfare.

Pollution

The presence or introduction into the environment of contaminants or substances that cause harm or discomfort to organisms, including humans.