Question

JL.54 Altec Lansing makes a variety of speakers for computer systems and they are looking to adopt Lean Production principles into their main production facility. This production facility operates 320 days per year one of their bestselling speaker systems has annual demand of 32,000 units. They can produce up to 950 of these systems each day. It costs $14.52 to set up a work cell to produce this system. The cost of each system is $44 and annual holding costs are $11.80 per unit. Setup labor cost is $11 per hour.

What is the optimal size of the production run for this system? (Display your answer to the nearest whole number).
   

Given your answer to the previous question, how many production runs will be required each year in order to meet the annual demand? (Round your answer UP to the next whole number.)
   

How much time (in minutes) does it take to set up a work cell? (Display your answer to the nearest whole number.)
  

The large retailers who are wholesale customers of Altec Lansing are pressing the company to sell this and other speaker systems in much smaller quantities to support their JIT distribution models. For example, for this particular speaker system wholesale customers want to purchase in lots of 170. In order to meet this requirement, what would be the required setup time (in minutes) to make this order quantity an optimal production run quantity? (Display your answer to the nearest whole number.)
  

Answer 1

Given: Annual Demand = D = 32,000 units

No. of operational days N = 320 days

Daily demand = d = D / N = 32000 / 320 = 100 units

Daily production = p = 950 units

Cost of set-up = S = $14.52

Labor cost = L = $11 per hour

Cost of each system = C = $44

Annual Holding cost = H = $11.80 per unit

1. Optimal size of production = EPQ = = = 296.68 units = 297 units

2. No. of production runs required per year = D / EPQ = 32000 / 296.68 = 107.86 runs = 108 runs

3. Set-up time required = S / L = 14.52 / 11 = 1.32 hours = 1.32 * 60 = 79.2 = 79 minutes

4. New lot size = 170 units

Hence, we have to find set-up cost for this lot size

EPQ =

170 =

Snew = $4.7676

Hence, time required for this set-up = Snew / L = 4.7676 / 11 = 0.433 hours = 0.433 * 60 = 26 minutes

_______________________________________________________________________________________

In case of any doubt, please ask through the comment section before Upvote/downvote.