1. Healthy Plants Ltd. (HP) produces its premium plant food in 50-pound bags. Demand for the product is 10,000 pounds per week. HP operates fifty weeks per year and can produce 26,000 pounds per week. The setup cost is $190 and the annual holding cost rate is $0.62 per bag. Currently, HP produces its premium plant food in batches of 1,200,000 pounds.
Calculate the total annual costs of this operating policy.
2. Healthy Plants Ltd. (HP) produces its premium plant food in 50-pound bags. Demand for the product is 100,000 pounds per week. HP operates fifty weeks per year and can produce 250,000 pounds per week. The setup cost is $200 and the annual holding cost rate is $0.55 per bag. Currently, HP produces its premium plant food in batches of 1,000,000 pounds. Determine what will happen if HP uses the economic production quantity model to establish the quantity produced each cycle.
(Round your answers to 2 decimal places, the tolerance is +/-0.01.Do not round your intermediate computations.)
(a) Calculate the economic production quantity in pounds (EPQ)
(b) Calculate the maximum inventory level using the EPQ in pounds
(c) Calculate the total annual cost of using the EPQ.