Bill Penny has a repetitive manufacturing plant producing trailer hitches in Arlington, Texas. The plant has an average inventory turnover of only 12 times per year. He has therefore determined that he will reduce his component lot sizes. He has developed the following data for one component, the safety chain clip:

Annual demand = 31,200 units

Daily demand = 120 units

Daily production (in 8 hours) = 960 units

Desired lot size (1 hour or production) = 120 units

Holding cost per unit year = $ 12

Setup labor cost per hour = $ 20