Question

3. 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 (D) 20,000 Daily demand (d) Daily production (p) 250 Desired lot size (Q) Holding cost per unit per year (H) $50 1) What is the setup cost based on the desired lot size? (10 points) 80 2) What is the desired setup time based on $50 hour setup labor? (10 points) 3) Theoretically, if the setup time is short enough, is it possible for us to have a desired lot size as ONE unit order? Why? (8 points) Page 2 of 2 4 backspace

Answer 1

We know

From the above we get

S = set up cost

Q = Desired lot size = 60

p = daily production = 250

d = daily demand = 80

H= holding cost = $50

setup labor cost = $50

S = 60^2*((0.68*50)/(2*20000))

Answer a: S = $3.06 per hour

Answer b: Setup time = S/labor cost per hour = (3.06/50)*60 = 3.67 minutes

Answer c: Yes, it is possible to have desired lot size as one, because we will not be wasting time in setups.