MUSCLETECH CORPORATION - 100% WHEY PROTEIN

Consider any product from MUSCLETECH CORPORATION with a demand of 500 units per day, a setup cost per production run of $100, a daily holding cost per unit of $0.20, and an annual production rate of 219,000 units. MUSCLETECH operates and experiences demand 365 days per year. Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the production order quantity model. How much money per year has that mistake cost the company? (To answer this question, calculate the following points).

• Calculate EOQ
• Calculate POQ
• annual cost of the wrong policy is ...
• annual cost of the correct policy is ...
• the mistake cost = annual cost of the wrong policy - annual cost of the correct policy