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.

Question

Arthur Cole

Business

14 November, 17:56

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.

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Answers (1)

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Ahmed Ferguson · Answer 1

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