Setup cost should be treated as ordering cost

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Reference no: EM13215708

A shop makes candles. Monthly demand is 360 boxes. Raw materials can be produced (supplied) at a rate of 36 boxes per day. Daily usage rate is 18 boxes per day. Assume that demand is uniform throughout the month. Setup cost is $60 for a run, and holding cost is $2 per box per month.

Hint 1: Setup cost should be treated as ordering cost.

Hint 2: Larger time unit is the month and smaller time unit is the day.

Reference no: EM13215708

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