Montegut Manufacturing manufactures a product for which the annual demand is 12,000 units. Production averages 120 units per day, while demand is 45 units per day. Holding costs are $1.05 per unit per year and setup cost is $220. Assuming that Montegut Manufacturing wishes to minimize costs, what would be the optimum policy to produce an EOQ/lot size equal to?

• If they wish to produce this product in economic batches, what size batch should be used?