Carol Cagle has a repetitive manufacturing plant producing trailer hitches in Ar
ID: 365429 • Letter: C
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 $20 per hour
Annual holding cost $12 per unit
Daily production 960 units/8 hour day
Annual demand 43,680 (260 days each times × daily demand of 168 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 (round your response to two decimal places).
Explanation / Answer
Annual demand- 43680 units
Daily demand – 168 units
Daily production – 960 units
Desired lot size-120 units
Holding cost per unit per year- $12 per unit
Set up labour cost per hour-$20
Set up time= (120*120) * 12 * (1-168/960)/ 2 (43680)
= 142560/87360
= $1.63 / hourly labour rate ($20)
= 0.0815 hours or 4.89 minutes