) If it costs $2.00 per unit to store an item for one year and $40.00 setup cost every time you produce a lot, and you use 1,000 units per year, how many lots of what size should be manufactured each year?

200 units

Explanation:

Given that

Carrying cost per unit = $2

Ordering cost or setup cost = $40

Annual demand = $1,000

In this question we use the economic order quantity formula which is shown below:

The computation of the economic order quantity is shown below:

= 200 units

So by considering the economic order quantity we can find the lot size i.e 200 units