Question

A production process consists of a three-step operation.

The scrap rate is 17 percent for the first step and 10 percent for the other two steps.

a.If the desired daily output is 484 units, how many units must be started to allow for loss due to scrap? (Do not round intermediate calculations. Round up your final answer to the next whole number.) Number of units 720

b.If the scrap rate for each step could be cut in half at every operation, how many units would this save in terms of the scrap allowance? (Do not round intermediate calculations. Round up your final answer to the next whole number.) Number of units

c.If the scrap represents a cost of $10 per unit, how much is it costing the company per day for the original scrap rate (i.e. the Part a scrap rate)? (Round your final answer to the nearest whole number. Omit the "$" sign in your response.) Cost $

Answer 1

a)

Daily desired output = 484 units

Number of units must be started = 484 / ((1-.17)*(1-.1)*(1-.1)) = 720 units

b)

Number of units must be started = 484 / ((1-.17/2)*(1-.1/2)*(1-.1/2)) = 586 units

Number of units saved in scrap allowance = 720 - 586 = 134 units

c)

Number of scrap units = 720 - 484 = 236 units

Cost = 236*10 = $ 2,360