A repetitive manufacturing firm is planning on level material use. The following
ID: 2445436 • Letter: A
Question
A repetitive manufacturing firm is planning on level material use. The following information has been collected. Currently, the firm operates 250 days per year.
Annual demand
22,000
Daily demand
88
Daily production
250
Desired lot size (2 hours of production)
63
Holding cost per unit per year
$40
a) What is the setup cost, based on the desired lot size?
b) What is the setup time, based on $40 per hour setup labor?
Annual demand
22,000
Daily demand
88
Daily production
250
Desired lot size (2 hours of production)
63
Holding cost per unit per year
$40
Explanation / Answer
a) Set up Cost = Q2 * H *(1-d/p) / 2D
=63 *2 *$40* (1-88 / 250 ) / 2 * 22,000
=$3,969 * 40 *0.648/44,000
=$102,876.48/ 44,000
=$2.33
Explanation:
1-88/250 it is mixed fraction 250*1=250 -88=162/250=0.648
63 * 2 = 63 square it means 63*63=$3,969
___________________________________________________________
b) Set up time
Daily production / hours = 250 / 120 minutes = 2.08 * 2 hours=4 hours and .16 min
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