What is the most economical lot size to produce

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The cost to set u for producing a standard component is approximately $200. Once set up they can produce at a rate of approximately 500 units/month (6,000 units per year) at a cost of $100 each. A monthly demand is estimated to be 400 units. If the firm uses 30% annual rate for holding inventory (assume 200 working days per year):

(a) What is the most economical lot size to produce (ERL)?

Reference no: EM13820403

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