5-4 What is a qualitative forecasting model and when is it appropriate? 5-5 What are some problems…

➤ How do you calculate the optimal production batch size (EPQ) for the mini-cutter example?
Use EPQ: Q* = sqrt((2DS/H) * (p/(p−d))). Here D=6,750/yr, S=$150, H=$1/yr, p=125/day, d=30/day. p/(p−d)=125/95≈1.3158. So Q* ≈ sqrt(2,025,000 * 1.3158) ≈ 1,633 mini-cutters per batch. That balances setup and holding costs during production.