An engineering team has determined that a work center is producing a part in lot sizes of 500. The labor rate for the operation is $10.50 per hour, the material cost per unit is $.65, the carrying cost per unit per year is 40% of material and labor cost per unit, the production rate is 25 per hour, the demand is 8,000 per year, and the usage rate is 5 per hour.
a. What setup time minimizes the total of annual setup cost and annual carrying cost if a lot size of 10 is set for the part at the work center?
b. Does it seem reasonable that the setup time could be reduced to this amount? Discuss what could be done at the work center to achieve such a setup time