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All-Star bats sells aluminum bats to colleges. The monthly demand for bats is 1000 (throughout the year), and it costs $10 to produce a bat. The holding cost is about $0.75 per bat per year. It costs $200 to set up each production run.
1. How many bats should All Star produce in each production batch?
2. Assume the holding cost and price of a bat in the market are fixed. A foreman has proposed that the production cost of a bat can be reduced by 20 cents by making a process change. However, this will increase the setup cost to $400. Should All-Star implement this change?
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