A Tin-Container Manufacturing Company Uses the Same Machine to Produce

Multiple Choice

A tin-container manufacturing company uses the same machine to produce different items such as popcorn tins and 30-gallon storage drums. The machine is set up to produce a quantity of one item and then is reconfigured to produce a quantity of another item. The plant produces a run and then ships the tins out at a constant rate so that the warehouse is empty for storing the next run. Assume that the number of tins stored on average during 1 year is half of the number of tins produced in each run. A plant manager must take into account the cost to reset the machine and the cost to store inventory. Although it might otherwise make sense to produce an entire year's inventory of popcorn tins at once, the cost of storing all the tins over a year's time would be prohibitive. Suppose the company needs to produce 1.7 million popcorn tins over the course of a year. The cost to set up the machine for production is $1300, and the cost to store one tin for a year is approximately $1. What size production run will minimize setup and storage costs?

A) 66,483 cans
B) 53,403 cans
C) 76,453 cans
D) 46,473 cans
E) 56,423 cans