Dietrick Corporation produces and sells two products. Data concerning those products for the most recent month appear below:

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 = ......................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 =

setup cost =

setup cost = $1.75

Next,

the setup time is given by

setup time = ....................2

setup time =

setup time = 2.625 min

Opportunity cost is defined as the loss incurred when one chooses one alternative over another.

In this scenario, the forgone option is full-time work along with other costs associated with that period when opting for schooling instead. Room and board expenses remain constant whether attending school or working full time, thus these are not factored in. Earnings from part-time work during school are deducted as they would have been earned during full-time employment.

Thus;
Opportunity cost = $20,000+$10,000+$1,000-$8,000 = $23,000