A metal fabrication shop has a single punch press. There are currently three partsthat the shop has agreed to produce that require the press, and it appears that theywill be supplying these parts well into the future. You may assume that the press isthe critical resource for these parts, so that we need not worry about the interaction of the press with the other machines in the shop. The relevant information here is: Part Number Demand/year Set up Cost ($) Cost per Unit Production ($) rate/year 1 2,500 80 16 45,000 2 5,500 120 18 40,000 3 1,450 60 22 26,000 Holding costs are based on an 18 percent annual interest rate, and the products are to be produced in sequence on a rotation cycle. Setup times can be considered negligible. What is the optimal cycle time in years?
A metal fabrication shop has a single punch press. There are currently three partsthat the shop has agreed to produce that require the press, and it appears that theywill be supplying these parts well into the future. You may assume that the press isthe critical resource for these parts, so that we need not worry about the interaction of the press with the other machines in the shop. The relevant information here is: Part Number Demand/year Set up Cost ($) Cost per Unit Production ($) rate/year 1 2,500 80 16 45,000 2 5,500 120 18 40,000 3 1,450 60 22 26,000 Holding costs are based on an 18 percent annual interest rate, and the products are to be produced in sequence on a rotation cycle. Setup times can be considered negligible. What is the optimal cycle time in years?
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
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Transcribed Image Text:A metal fabrication shop has a single punch press. There are currently three partsthat the shop has agreed to produce that
require the press, and it appears that theywill be supplying these parts well into the future. You may assume that the press
isthe critical resource for these parts, so that we need not worry about the interaction of the press with the other machines
in the shop. The relevant information here is:
Cost per Unit Production
rate/year
($)
2,500
80
16 45,000
5,500
120
18 40,000
1,450
60
22
26,000
Holding costs are based on an 18 percent annual interest rate, and the products are to be produced in sequence on a
rotation cycle. Setup times can be considered negligible.
What is the optimal cycle time in years?
Part Number
1
2
3
Demand/year
Set up Cost ($)
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