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2 months ago

6

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?

1 answer:

Scilla [3.8K]2 months ago

8 0

Answer:

setup cost = $1.75

setup time = 2.625 min

Explanation:

given data

The firm operates for 250 days annually.

Annual demand is 22,000.

Daily demand is 88.

Daily production stands at 250.

Desired lot size is set at 63 (equivalent to 2 hours of output).

Holding costs are $40 per unit each year.

To determine

the setup cost and setup time

solution

The setup cost is calculated as

setup cost = $\frac{Q^2*H*(1-\frac{d}{p})}{2D}$ ......................1

Here, Q represents the desired lot size, H is the holding cost, d denotes daily demand, D is annual demand, and p is the daily output.

Plugging in the values,

setup cost = $\frac{63^2*40*(1-\frac{88}{250})}{2*22000}$

setup cost = $\frac{2969*40*(0.648)}{44000}$

setup cost = $1.75

Next,

the setup time is given by

setup time = $\frac{setup\ cost}{setup\ labor}$ ....................2

setup time = $\frac{1.75*60min/hr}{40}$

setup time = 2.625 min

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