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