Question

Carol Cagle has a repetitive manufacturing plant producing trailer hitches in​ Arlington, Texas. The plant has an average inventory turnover of only 12 times per year. He has therefore determined that he will reduce his component lot sizes. He has developed the following data for one​ component, the safety chain​ clip: Setup labor cost ​$25 per hour Annual holding cost ​$13 per unit Daily production 960 ​units/8 hour day Annual demand 23,000 ​(250 days eachtimes×daily demand of 92 ​units) Desired lot size 120 units​ (one hour of​ production)
To obtain the desired lot size, the set-up time that should be achieved = ___ minutes.

Answer 1

Answer:

0.1472 hours or 8.832 minutes

Explanation:

Annual demand- 23,000 units

Daily demand – 92 units

Daily production – 960 units  per 8 hour day

Desired lot size - 120 units

Holding cost per unit per year - $13 per unit

Set up labor cost per hour - $25 per hour

Set up cost:

= {(120 × 120) × $13 × [1 - (92 ÷ 960)]} ÷ [2 × (23,000) ]

= $169,260 ÷ 46,000

= $3.68

Set up time:

= Set up cost ÷ Set up labor cost per hour

= $3.68 ÷ $25 per hour

= 0.1472 hours or 8.832 minutes