(Appendix: EPR) Danielle Steele has taken a job as production superinten¬ dent in a plant that makes, among other products, jewelry cases. She is try¬ ing to determine how many cases to produce on each production run. Discussions reveal that last year the plant made 7,500 such cases, and this level of demand is expected for the coming year. The setup cost of each run is $400, and the cost of carrying a case in inventory for a year is esti¬ mated at $2.50.

a. Calculate the economic production run (EPR) and the total cost associ¬ ated with it.

b. Recalculate the EPR and total cost if the annual cost of carrying a case in inventoiy is $10 and the setup cost is $100.

c. Based on your answer to part (a), how many production runs should Steele expect for the coming year?

d. Based on your answers to parts

(a) and (c), estimate the total setup costs to be incurred for the year.

LO.1