Chris Millikan Manufacturing, Inc., is moving to kanbans to support its telephone switching-board assembly lines. Determine the size of the kanban for subassemblies and the number of kanbans needed.
Setup cost = $30
Cost = $120 per subassembly
Daily production = 20 subassemblies
Annual usage = 2,500 (50 weeks x 5 days each
X daily usage of 10 subassemblies)
Lead time = 16 days,
Safety stock = 4 days’ production of subassemblies.