Calculate the following: i) Standard time per piece of a job whose normal time is 5 minutes. ii) Number of pieces to be produced per day. iii) Efficiency of worker, for 190 jobs, he produced in a shift.

A worker in a manufacturing industry is expected to work for a minimum of 400 minutes, in an 8-hour shift. The remaining 80 minutes is meant for his personal and rest needs. Calculate the following:
i) Standard time per piece of a job whose normal time is 5 minutes.
ii) Number of pieces to be produced per day.
iii) Efficiency of worker, for 190 jobs, he produced in a shift.

Solution.

(i) Standard time per price of job = 5 x (480/400) = 6 minutes

(ii) Number of pieces to be produced per day = 480/6 = 80 piece of job or 400/5 = 80 piece

(iii) Efficiency of worker
= (190/80) x 100
= 237.50 %

Determine each alternative’s break-even point in unit

A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two, alternatives, A and B have been identified and the associated costs and revenues have been estimated. Annual fixed costs, would be Rs. 84,00,000 for A and Rs. 60,00,000 for B ; variable costs per unit would be Rs. 120 for A and Rs. 150 for B; and revenue per unit would be Rs. 180 for A and Rs. 200 for B.
i) Determine each alternative’s break-even point in unit
ii) At what volume of output would the two alternatives yield the same profit?
iii) If expected annual demand is 300000 units, which alternative would yield the higher profit?

Solution.

(i) Break even point = fixed cost/contribution per unit
Alternative:
A= 8400000 / (180 - 120) = 140000 units
B= 6000000 / (200 - 150) = 120000 units


(ii) Let the level at which the two alternative yield same profit is ‘X’

Profit:
A = X * 60 - 84,00,000
B = X * 50 - 60,00,000
60X - 84,00,000 = 50X - 60,00,000
10X = 24,00,000
X = 24,00,000/10
X = 2,40,000 units

(iii) Profit when demand is 3,00,000 units

A = 3,00,000 x 60 - 84,00,000 = 96,00,000
B = 3,00,000 x 50 - 60,00,000 = 90,00,000

A yields higher profit

If 850 pallet loads must be moved during each 8- hour shift, how many lift trucks are required?

Northwest product company uses forklift trucks to transport lumber from the mill to a storage warehouse 0.5 km away. The lift trucks can move three loaded pallets per trip and travel at an average speed of 8 km per hour (allowing for loading, delays and travel). If 850 pallet loads must be moved during each 8- hour shift, how many lift trucks are required?

Solution.
Time taken by truck to move to storage = (60 minutes/8) x 0.5 = 3.75 minutes

Number of pallets moved in a truck per day =

8*60*3 / 3.75 = 384

Number of trucks required = 850/384 = 2.21

Three lift trucks are required.

Assuming that replacement rate is instantaneous determine the optimum order quantity.

The demand for an item is 18000 units per year. The holding cost is Rs. 1.20 per unit time and the cost of storage is Rs. 5.00. The production cost is Rs. 400.00 assuming that replacement rate is instantaneous determine the optimum order quantity.


Solution:
Annual Demand = 18000 Units
Holding cost = Rs 1.20 per unit
Storage cost = Rs 5 per unit
Total Storage cost = Rs 6.20 per unit
Cost of Placing an order = Rs 400

Economic Order Quality = sqrt of 2v * p/s
Where U = Annual Demand
P = Cost of Placing an order
S = Storage cost

= sqrt of 2 * 18000 * 400/6.20
= 1524 Units