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 = [tex]\frac{Q^2*H*(1-\frac{d}{p})}{2D}[/tex] ......................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 = [tex]\frac{63^2*40*(1-\frac{88}{250})}{2*22000}[/tex]
setup cost = [tex]\frac{2969*40*(0.648)}{44000}[/tex]
setup cost = $1.75
and
setup time is
setup time = [tex]\frac{setup\ cost}{setup\ labor}[/tex] ....................2
setup time = [tex]\frac{1.75*60min/hr}{40}[/tex]
setup time = 2.625 min
a. The setup cost, based on the desired lot size is $2.34.
b. The setup time, based on $40 per hour setup labor is 3.51min.
a. Setup cost
Using this formula
Set up=Q²×H×(1-d/p)/2D
Where:
Q=Desired lot size=63 (2 hours of production)
H=Holding cost= $40 per unit per year
d=Daily demand=88
D=Annual demand=22,000
p=Daily production=250
Let pug in the formula
Set up=63²×40×(1-88/250)/2×22,000
Set up=3,969×40×0.648/44,000
Set up=$2.34
b. Setup time
Setup time=Setup cost/Setup labor
Setup time=$2.34×60 min/hr÷40
Setup time=3.51 min
Inconclusion the setup cost, based on the desired lot size is $2.34.
and the setup time, based on $40 per hour setup labor is 3.51min.
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