Unformatted text preview: 2 + ½ = $8.39 Average Annual Cost for Q =300 units = TC(300) = $160 ,800+$800,000/300 + $300/2 = $163,616.67 If we wish to find the average annual cost per battery, average annual unit cost = $163,616.67/8000 = $20.45 (d) TP(Q) = Total Revenue per year – TC(Q) = $200,000($160,800 + $800,000/Q + Q/2) = $39,200  $800,000/Q  Q/2 TP'(Q) = 800,000/Q 2 ½ Setting TP'(Q) = 0, we get 800,000/Q 2 ½ = 0 or Q = 1265 batteries as the positive root. Since TP''(Q) = 1,600,000/Q 3 < 0 for all positive Q, an order size of Q=1265 will maximize total profit. Problem #3 Calculations were done on spreadsheet. Within an interval length of .6, the optimal value to two decimal places is 1.00....
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 Spring '08
 Patton
 Economics, annual holding cost, Average Annual Cost

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