SITUATION: A company is about to begin production of a new product. The manager of the department that will produce one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units will be used daily in assembling the final product. Assembly will take place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at the cost of $300. Inventory holding costs will be $10 a year. QUESTION: Suppose the manager decides to increase the run size of the new product. How many additional units would be needed just to accommodate the other job? How much will that increase the total annual cost?

SITUATION: A company is about to begin production of a new product. The manager of the department that will produce one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units will be used daily in assembling the final product. Assembly will take place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at the cost of $300. Inventory holding costs will be $10 a year. QUESTION: Suppose the manager decides to increase the run size of the new product. How many additional units would be needed just to accommodate the other job? How much will that increase the total annual cost?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

SITUATION: A company is about to begin
production of a new product. The manager of
the department that will produce one of the
components for the product wants to know
how often the machine used to produce the
item will be available for other work. The
machine will produce the item at a rate of
200 units a day. Eighty units will be used daily
in assembling the final product. Assembly will
take place five days a week, 50 weeks a year.
The manager estimates that it will take almost
a full day to get the machine ready for a
production run, at the cost of $300. Inventory
holding costs will be $10 a year.
QUESTION: Suppose the manager decides to
increase the run size of the new product. How
many additional units would be needed just
to accommodate the other job? How much
will that increase the total annual cost?

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