Problem:

The demand for 1,000 units of a part to be used at a uniform rate throughout the year may be met by manufacturing. The part can be produced at the rate of 3 per hour in a department that works 1,880 hours per year. The set-up cost per lot is estimated to be $40, and the manufacturing cost has been established at $5.20 per unit. Interest, insurance, taxes, space, and other holding costs are $3.10 per unit per year.

Required:

Question: Calculate the economic manufacturing quantity.

Note: Explain in detail and show all computations in proper way.