Question

Describe your plan or countermeasures, regarding to developing a Cost Estimating Relationship, as an engineer in controlling the effects/impacts given by the following items from the perspective of Engineering Economics

- Direct labor hours

-. Machine hours

-. Number of units

-. Number of production runs

-. Number of orders

Answer 1

I will give you the points required to answer this question simply by starting with the influence of each factor on Industrial Engineering, it will give you an idea on optimization and cost analysis.

• Direct labor refers to the salaries and wages paid to workers who are directly involved in the manufacture of a specific product or in performing a service. For example, a business that provides services to its customers, direct labor is the work performed by the workers who provide the service directly to the customers such as store workers, lawyers, etc.
• Calculating labor hours is important since it is a dependent factor of cost estimation and The direct labor hours are the number of direct labor hours needed to produce one unit of a product. The figure is obtained by dividing the total number of finished products by the total number of direct labor hours needed to produce them. For example, if it takes 10 hours to produce 100 items, it means that 1 hour is needed to produce 10 products, and 0.1 hours to produce 1 unit. there are many ways at which an industry reduces labor hours per product in an industry some of em include Avoiding Overtimes, Training the worker, Using an effective production line, Hiring the right worker for the job, and using the right technology with the right help for the required expert. these are some of the well-known technics to reduce cost due to direct labor hours.
• Machine hours just like direct labor lours is concerned with how much of useful working hours of the machine are spent on the manufacturing product per unit. the main way to reduce the effect of machine time on the total cost is by reducing the major downtime concerned with the working life of the machine. by increasing the productivity of the machine in an industry we can decrease the required working hours needed per unit, we can reduce the machine hours by Increasing and Improving Staff Communication, Hold Regular Staff Evaluations, Set Specific Manufacturing Plant Goals, Conduct Regular Manufacturing Equipment Maintenance, Upgrade Your Manufacturing Equipment, Track Manufacturing Downtime Carefully, Properly Train Production Line Employees, doing these efficiently can reduce the Total cost concerned with Machine hours.
• All other factors can be explained by using the term Economic order quantity (EOQ) is the order size that minimizes the sum of carrying costs and ordering costs of a company’s inventories. The two most significant inventory management costs are ordering costs and carrying costs. Ordering costs are costs incurred on placing and receiving a new shipment of inventories. These include communication costs, transportation costs, transit insurance costs, inspection costs, accounting costs, etc. Carrying costs represent costs incurred on holding inventory in hand. These include the opportunity cost of money held-up in inventories, storage costs such as warehouse rent, insurance, spoilage costs, etc. Ordering costs and carrying costs are opposite in nature. To minimize its inventory carrying costs, a company must place small orders. But small order size means that the company must place more orders which increases its total ordering costs. Similarly, if a company wants to cut its ordering costs, it must reduce the number of orders placed which is possible only when order size is large. But an increase in order size means that the average inventory balance on hand will be high which increases total carrying costs for the period. Instead of focusing on ordering costs or carrying costs individually, a company should attempt to reduce the sum of these costs. The economic order quantity (EOQ) model does just that, by using effective inventory control we can easily reduce and improve cost and cost optimization respectively.