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6 May, 08:52

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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  1. 6 May, 10:00
    0
    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
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