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Question 12.SP.4: Leonard Presby, Inc., has an annual demand rate of 1,000 uni...

Leonard Presby, Inc., has an annual demand rate of 1,000 units but can produce at an average production rate of 2,000 units. Setup cost is $10; carrying cost is $1. What is the optimal number of units to be produced each time?

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Q^*_p = \sqrt{\frac{2DS}{H \left(1 – \frac{Annual  demand  rate}{Annual  production  rate}\right)}} = \sqrt{\frac{2(1,000)(10)}{1 [1 – (1,000/2,000)]}} =  \sqrt{\frac{20,000}{1/2}} = \sqrt{40,000} = 200 units

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