Question

A production process consists of a three-step operation. The scrap rate is 18 percent for the first step and 9 percent for the other two steps.

a.If the desired daily output is 453 units, how many units must be started to allow for loss due to scrap? (Do not round intermediate calculations. Round up your final answer to the next whole number.)

Number of units           

b.If the scrap rate for each step could be cut in half at every operation, how many units would this save in terms of the scrap allowance? (Do not round intermediate calculations. Round up your final answer to the next whole number.)

Number of units           

c.If the scrap represents a cost of $10 per unit, how much is it costing the company per day for the original scrap rate (i.e. the Part a scrap rate)? (Round your final answer to the nearest whole number. Omit the "$" sign in your response.)

Cost           $

Answer 1

Start with 1000 units.
1000 x (100% - 18%) = 820 units after the first step
820 x (100% - 9%) = 746 units after the second step
746 x (100% - 9%) = 678 units after the third step

a.
453 x (1000 / 678) = 668 units to start with

b.
Start with another 1000 units:
1000 x (100% - 9%) = 910 units after the first step
910 x (100% - 4.5%) = 869 units after the second step
869 x (100% - 4.5%) = 829 units after the third step
453 x (1000 / 829) = 546 units to start with under the improved procedure
668 - 546 = 122 units saved

c.
(668 - 453) units x $10 = $ 2150daily cost in scrapped units