2 Calculate the switch over point We are producing the same widgets as in the pr

Question

2 Calculate the switch over point We are producing the same widgets as in the previous example. We got an offer from a producer to make the widgets for us. This reduces our fixed costs to 15k Euro and they sell us the widgets for 7.5 Euro per piece. Up to what amount, will this be interesting for us? From what amount will it be better to produce ourselves? Estimate the capacity requirements for a single product In our company we have a machine available for 220 days per year at 7.5 hours per day. We foresee buffer of 10% for unexpected events and maintenance. On this machine we will produce 50,000 parts, every part takes 2 minutes to produce. How many machines will we need to cover our production? Estimate the capacity requirements for a series of products We consider the same machine for production and availability as before. Now we add two products to the production line and we produce as displayed in the table below 4. Quantity Batch Set Up time 50,000 25,000 75,000 Time 2 minutes 5 minutes 1 minute 200 500 1000 30 minutes 60 minutes 45 minutes

Explanation / Answer

Answer to Q.2

Not possible to answer without knowing variable cost of production of widgets

Answer to Q.3

Gross Available time per machine = 220 days/ year x 7.5hours/ day x 60 minutes/ hour = 99000 minutes

With 10% buffer, Net available time per machine = Gross available time / 1.10 = 99000/1.1 = 90,000 minutes

Total time required to produce 50,000 parts = 50,000 x 2 = 100,000 minutes

Hence number of machines required

= Total time required / Net available time per machine

= 100,000 /90,000

= 1.1 ( 2 rounded to next higher whole number )

Answer to Q.4:

Time required for each product

= Quantity x Production time + Quantity/ Batch ( i.e number of set ups ) x Set up time

Thus,

Time required for A = 50000 x 2 +( 50000/200 )x 30 = 100,000 + 7,500 = 107500

Time required for B = 25000 x 5 + ( 25000/500) x 60 = 125000 + 3000 = 128,000

Time required for C = 75,000 x 1 + 75000/1000 x 45 = 75,000 + 3375 = 78,375

Hence total time required by A, B and C = 107500 + 128,000 + 78375 = 313875 minutes which is cumulative capacity requirement

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