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t Iding cost uction age ck $30 $120 per subassembly 25 subassemblies 4,500 (50 weeks x5 days eac 18 subassemblies) 12 days 4 days' production

t Iding cost uction age ck $30 $120 per subassembly 25 subassemblies 4,500 (50 weeks x5 days eac 18 subassemblies) 12 days 4 days' production

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Kanban container size​ = units ​

Number of kanbans needed​ = kanbans ​

### Determining Kanban Size for Subassemblies **Pauline Found Manufacturing, Inc.** is transitioning to a Kanban system to support its telephone switching-board assembly lines. Below is a detailed analysis to determine the size of the Kanban for subassemblies and the number of Kanbans needed. #### Cost and Production Parameters - **Setup Cost:** $30 - **Annual Holding Cost:** $120 per subassembly - **Daily Production:** 25 subassemblies - **Annual Usage:** 4,500 subassemblies *(Calculated as 50 weeks × 5 days each week × daily usage of 18 subassemblies)* - **Lead Time:** 12 days - **Safety Stock:** 4 days' production ### Explanation #### 1. **Setup Cost** This is the fixed cost incurred each time the production process is set up for subassemblies, amounting to $30. #### 2. **Annual Holding Cost** The cost to hold one subassembly in inventory per year is $120. #### 3. **Daily Production** The factory can produce 25 subassemblies each day. #### 4. **Annual Usage** The company requires 4,500 subassemblies annually. This is calculated assuming the factory operates for 50 weeks per year, with a daily usage rate of 18 subassemblies. #### 5. **Lead Time** The time taken from when a Kanban is initiated until the subassemblies are produced and available, which is 12 days. #### 6. **Safety Stock** To buffer against uncertainties in demand or supply, 4 days' worth of production is kept as safety stock. By implementing a Kanban system with the specified parameters, Pauline Found Manufacturing, Inc. aims to streamline its assembly line operations, minimize inventory costs, and enhance production efficiency.
Transcribed Image Text:### Determining Kanban Size for Subassemblies **Pauline Found Manufacturing, Inc.** is transitioning to a Kanban system to support its telephone switching-board assembly lines. Below is a detailed analysis to determine the size of the Kanban for subassemblies and the number of Kanbans needed. #### Cost and Production Parameters - **Setup Cost:** $30 - **Annual Holding Cost:** $120 per subassembly - **Daily Production:** 25 subassemblies - **Annual Usage:** 4,500 subassemblies *(Calculated as 50 weeks × 5 days each week × daily usage of 18 subassemblies)* - **Lead Time:** 12 days - **Safety Stock:** 4 days' production ### Explanation #### 1. **Setup Cost** This is the fixed cost incurred each time the production process is set up for subassemblies, amounting to $30. #### 2. **Annual Holding Cost** The cost to hold one subassembly in inventory per year is $120. #### 3. **Daily Production** The factory can produce 25 subassemblies each day. #### 4. **Annual Usage** The company requires 4,500 subassemblies annually. This is calculated assuming the factory operates for 50 weeks per year, with a daily usage rate of 18 subassemblies. #### 5. **Lead Time** The time taken from when a Kanban is initiated until the subassemblies are produced and available, which is 12 days. #### 6. **Safety Stock** To buffer against uncertainties in demand or supply, 4 days' worth of production is kept as safety stock. By implementing a Kanban system with the specified parameters, Pauline Found Manufacturing, Inc. aims to streamline its assembly line operations, minimize inventory costs, and enhance production efficiency.
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