A product has annual demand of 100,000 units. The plant manager wants production to follow a four-hour cycle. Based on the following data, what setup time will enable the desired production cycle? d = 400 per day (250 days per year), p = 4000 units per day, H = $40 per unit per year, Q = 200 (demand for four hours, half a day), and the hourly labor rate is $18.

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) model and the formula for the optimal production run size can be used to determine the setup time that enables the desired production cycle. The setup time can be calculated using the formula for the production run size or cycle time, incorporating the given demand, production rate, and desired cycle quantity. Given the specific demand, production rates, and costs, the calculation involves determining the setup time that aligns with producing 200 units every four hours, considering the plant operates 250 days a year with a daily demand of 400 units. The correct setup time is calculated based on these parameters, leading to the selection of 24.0 minutes as the setup time that enables the plant to meet its production cycle goals efficiently.

A Product Has Annual Demand of 100,000 Units