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Morrison Manufacturing produces casings for sewing machines: large and small. To produce the different casings, equipment must be set up. The setup cost per production run is $18,000 for either casing. The cost of carrying small casings in inventory is $6 per casing per year; the cost of large casings is $18 per unit per year. To satisfy demand, the company produces 2,400,000 small casings and 800,000 large casings.
Problem 1: Find the number of large casings that should be produced per setup to minimize total setup and carrying costs for this product
Problem 2: Compute the setup, carrying and total costs associated with the economic order quantity for the large casings
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