Question: 1. Suppose Bryson Carpet Mills develops a production process that is most efficient when 6,000 yards per day are produced at a cost of $4.50 per yard. Everything else remains the same. How does this affect the calculation in problem?
Problem: Bryson Carpet Mills produces a variety of different carpets. Changing from production of one carpet to another involves a setup cost of $1,000. One particular carpet costs $5 per yard to produce. Annual demand for this style is 120,000 yards. Bryson Carpet Mills produces carpet 300 days per year. The production process is most efficient when 4,000 yards per day are produced. Inventory carrying cost is estimated at 20 percent annually. What should be the production order quantity?
2. After implementing the change described in problem 30, Bryson Carpet Mills now finds that it can reduce setup cost to $500. Does this further change the calculations of production order quantity? How?