Given the following information about a? product, at Michael? Gibson\'s firm, wh
ID: 329785 • Letter: G
Question
Given the following information about a? product, at Michael? Gibson's firm, what is the appropriate setup? time?
Setup labor cost
?$40.00 per hour
Annual holding cost
?$17 per unit
Daily production
1,200 ?units/day
Annual demand
29,000 (290 days each times×daily demand of 100 units)
Desired lot size
300 units
Setup time? = _________ minutes ?(round your response to two decimal? places).
*I posted this earlier today. The answer was wrong. The answer was 2.13.
Setup labor cost
?$40.00 per hour
Annual holding cost
?$17 per unit
Daily production
1,200 ?units/day
Annual demand
29,000 (290 days each times×daily demand of 100 units)
Desired lot size
300 units
Explanation / Answer
The problem will be solved using model for economic Production quantity ( EPQ )
Given are following details :
Annual demand = D = 29,000
Daily demand rate = d = 100 / day
Daily production rate = p = 1200 / day
Annual unit holding cost = Ch = $17 / unit
Set up cost = $ Cs
And
Economic production quantity EPQ ( i.e. Desired lot size ) = 300
As per formula,
EPQ = Square root ( 2 x Cs x D/ Ch x ( 1 – d/p))
Or, 300 = Square root ( 2 x Cs x 29000 / 17 x ( 1 – 100/1200) )
Or, 300 = Square root ( 2 x Cs x 29000 / 17 x 0.9166 )
Or, 300 = Square root ( 3722.19.Cs)
Or, 90000 = 3722.19.Cs
Or, Cs = 90000/3722.19
Or, Cs = 24.179
Since set up labour cost = $40 / hour and Set up cost = $24.179,
Set up time = ( 24.179/40) x 60 minutes = 36.2689 ( 36.27 minutes rounded to nearest whole number )
SET UP TIME = 36.27 MINUTES
SET UP TIME = 36.27 MINUTES
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