The production rate of final assembly is 2,400 digital video discs (DVDs) per day. After DVDs are assembled, they go directly to finished-goods inventory. Customers demand averages 1,300 DVDs per day, or about 325,000 per year. It costs $700 to set up the assembly line for the DVDs, the cost per DVD is $2.30, and the carrying cost rate is 30 percent of product cost per year.
a. How many DVDs should be in a production batch at final assembly?
b. What is the annual Total Cost at the EOQ?