Cycle Time and Velocity, MCE
Computador has a manufacturing plant in Des Moines that has the theoretical capability to produce 243,000 laptops per quarter but currently produces 91,125 units. The conversion cost per quarter is $7,290,000. There are 60,750 production hours available within the plant per quarter. In addition to the processing minutes per unit used, the production of the laptops uses 10 minutes of move time, 20 minutes of wait time, and 5 minutes of rework time. (All work is done by cell workers.)
Assume that the company identifies poor plant layout as the root cause of wait time and move time.
Note: If the plant layout is improved, then wait time and move time will decrease; if wait time and move time decrease, then MCE will increase; if MCE increases, then conversion cost per unit will decrease.
Required:
Assume that you set an MCE target of 75 percent, based on the improvement strategy described in note. What is the expected conversion cost per unit?