A Repetitive Manufacturing Firm Is Planning on Level Material Use

question 14

Essay

A repetitive manufacturing firm is planning on level material use. The following information has been collected. Currently, the firm operates 250 days per year.
$$\begin{array} { | l | r | } \hline \text { Annual demand } & 22,000 \\\hline \text { Daily demand } & 88 \\\hline \text { Daily production } & 250 \\\hline \text { Desired lot size (2 hours of production) } & 63 \\\hline \text { Holding cost per unit per year } & \$ 50 \\\hline\end{array}$$ a. What is the setup cost, based on the desired lot size?
b. What is the setup time, based on $40 per hour setup labor?

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Definitions:

Long-Run Industry Supply Curve

The long-run industry supply curve shows how the quantity supplied by an industry varies with price once all adjustment has been made, including the entry and exit of firms.

Increasing-Cost Industry

An industry in which production costs rise as firms enter the market, often leading to higher prices for consumers.

Positive Profits

Financial gains achieved when the total revenues exceed the total costs of a business.

Long-Run

In economics, the Long-Run is a period during which all input factors of production and costs are variable, allowing for the adjustment of all possible variables.