Question: A workpart costing $80 is processed through the factory. The manufacturing lead time for the part is 12 wk, and the total time spent in processing during the lead time is 30 hr for all operations at a rate of $35/hr. Nonoperation costs total $70 during the lead time. The holding cost rate used by the company for WIP is 26%..The plant operates 40 hr/wk, 52 wk/yr. If this part is typical of the 200 parts/wk processed through the factory, determine the following:
(a) the holding cost per pan during the manufacturing lead time and
(b) the total annual holding costs to the factory.
(c) If the manufacturing lead time were to be reduced from 12 wk to 8 wk, how much would the total holding costs be reduced on an annual basis?