Question

A repetitive manufacturing firm is planning on level material use. The following information has been collected. Currently, the firm operates 250 days per year.
Annual demand

22,000

Daily demand

88

Daily production

250

Desired lot size (2 hours of production)

63

Holding cost per unit per year

$40

a) What is the setup cost, based on the desired lot size?

b) What is the setup time, based on $40 per hour setup labor?

Answer 1

Answer:

setup cost = $1.75

setup time = 2.625 min

Explanation:

given data

firm operates = 250 days per year

Annual demand  = 22,000

Daily demand  =  88

Daily production  = 250

Desired lot size =  63  (2 hours of production)  

Holding cost   = $40 per unit per year

to find out

setup cost  and setup time

solution

we find first setup cost that is express as

setup cost = $\frac{Q^2*H*(1-\frac{d}{p})}{2D}$   ......................1

here Q is  Desired lot size and H is  Holding cost and d is  Daily demand and D is Annual demand   and p is  Daily production

put here value

setup cost = $\frac{63^2*40*(1-\frac{88}{250})}{2*22000}$

setup cost = $\frac{2969*40*(0.648)}{44000}$

setup cost = $1.75

and

setup time is

setup time = $\frac{setup\ cost}{setup\ labor}$    ....................2

setup time = $\frac{1.75*60min/hr}{40}$

setup time = 2.625 min