Question

rick wing has a repetitive manufacturing plant producing automobile steering wheels, use the following date to prepare for a reduse lots size , the firm uses a work year of 295 days ;

Setup labor cost per hour = $ 40

Annual Holding cost per unit year = $ 15

Daily production ( 8 hours) = 960 units / day

Annual Demand = 35,400 (295 days each * daily demand of 120)

Desired lot size (2 hour or production) = 240 units

find;

a/ setup cost ? b/ setup time?

Answer 1

Annual demand(D) = 35400 units

Daily demand(d) = 120 units

Daily production(p) = 960 units

Annual Holding cost(H) = $15 per unit

Desired lot size(Q) = 240 units

Set up labor cost per hour = $40

a) Set up cost(S) = [ Square of Q X H X (1-d/p) ] / 2D

= [ Square of 240 X 15 X (1-120/960) ] / (2 X 35400)

= (57600 X 15 X 0.875) / 70800

= 756000 / 70800

= $10.68

b) Set up time = Set up cost / setup labor cost per hour

= $10.68 / $40

= 0.0267 hour

= (0.082 X 60) minutes

= 4.92 minutes