Annual demand for a part is 500 units. The part is currently produced in batches. It takes 2.0 hours to set up the production machine for this part, and the downtime during setup costs $125/hr. Annual holding cost for the part is $5.00. The company would like to produce the part using a new flexible manufacturing system it recently installed. This would allow the company to produce this part as well as others on the same equipment. However, changeover time must be reduced to a minimum.
(a) Determine the required changeover (setup) time, in order to produce this part economically in batch sizes of one.
(b) If the part were to be produced in batch sizes of 10 units instead of one, what is the implicit changeover time for this batch quantity?
(c) How much are the annual total inventory costs to the company when the batch size = 1 unit?