(EPR) Lars Gonzalez has taken a new job as production superintendent in a plant that makes briefcases. He is trying to determine how many cases to produce on each production run. Discussions reveal that last year the plant made 2,500 such cases, and this level of demand is expected for the coming year. The setup cost of each run is $200, and the cost of carrying a case in inventory for a year is estimated at $5.

a. Calculate the economic production run (EPR) and the total cost associated with it.

b. Recalculate the EPR and total cost if the annual cost of carrying a case in inventory is $10 and the setup cost is $20.

LO1