Assume that a production line operates such that the production lot size model of Section 10.2 is applicable. Given D = 6400 units per year, Co = $100, and Ch = $2 per unit per year, compute the minimum cost production lot size for each of the following production rates:a. 8000 units per yearb. 10,000 units per yearc. 32,000 units per yeard. 100,000 units per year

a.1789

b. 1333

c. 894

d. 827

Explanation:

Given, D = 6400

Co = $100

Ch = $2

Below is the formula to find the minimum cost of production.

Minimum cost of production = √(2CoD/(Ch(1-D/P)))

Now insert the values.

The Minimum cost of production when P=8000 unit per year.

Minimum cost of production = √(2CoD/(Ch(1-D/P)))

Minimum cost of production = √((2×100×6400)/(2(1-6400/8000))) = 1789

Minimum cost of production when P is 10000= √((2×100×6400)/(2(1-6400/10000))) = 1333

Minimum cost of production when P is 32000= √((2×100×6400)/(2(1-6400/32000))) = 894.42 or 894

Minimum cost of production when P is 100000 = √((2×100×6400)/(2(1-6400/100000))) = 827

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