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In this assignment you were given some information about an assembly line that is

assembling watches that has a five workstations in it that are completely

balanced and that has a certain production rate and

intended production that it's supposed to produce.

And you were asked some questions about

what is the implied cost based on if it works as intended.

And if it doesn't work as intended, if there's a shortfall,

what is the additional cost?

And you were asked about what are some of the things that you would have had

to assume would be some things that you necessarily had to make

assumptions about in order to answer these questions.

So let's take a look at at

the cost without having any issues with this particular process.

So there were five work stations, that doesn't matter for

this particular question because they're balanced work stations.

So 300 units being produced in seven hours and therefore the cycle time per unit,

first you can think of it as the processing time.

The processing time per unit at each workstation would have been 7

times 60 minutes 420 divide by 300, gives us 1.4 minutes.

Now why do we say processing time equals cycle time?

Because at each workstation, there is only one resource,

one person or one machine that was working.

And therefore processing time equals a cycle time.

So the cycle time of each of the stations, the processing time of

each of the stations is 1.4 minutes and then the cycle time of the process.

If you're standing at the end of the process,

you're getting an assembled watch every 1.4 minutes.

And that's given that they're producing at their intended rate of 300 units per day.

So 1.4 minutes at each work station and for

the process balanced line therefore that's the case.

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Now, what will be the labor cost based on this?

There were five workers that were working seven hours.

So you multiply 5 times 7 that gives you your 35 work hours,

35 person hours $15 an hour gives you 525 per day.

Intended production of 300 watches, so

525 divide by 300 gives you an assembly cost of 1.75.

So the labor cost is $1.75 per unit based on five work stations and

a production of 300.

The next part of the assignment asks you about there being a shortfall.

So there's a 90% shortfall in the production and this can be taken in

two different ways based on two different assumptions that you can make about this.

So let's start with one viewpoint and then we'll get to the second viewpoint.

So first, if you think about it in terms of 90% of production was achieved.

In the 7 hours, 90% of production was achieved.

So in the 7 hours, there were 270 watches that were assembled.

So what would be the additional time that would be required for

making that shortfall?

So they have a demand of 300 units, they fell short by 10% so they made only 270.

For the balance 30 watches, you need 1.4 minutes per watch and

that gives you 30 times 1.4, 42 minutes.

So you need 42 minutes per watch and you remember, there were five workstations.

So you would have to take the 42 minutes at each of those five workstations,

if you were thinking of the cost.

The total additional cost that you would need to calculate in terms of overtime.

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Now, this needs certain assumptions and we'll talk about the assumptions later.

Let's take the alternative perspective.

So first we said they needed 90 minutes.

But if you say that there were 270 watches produced in 7 hours,

the cycle time would work out to 7 times 60, which is still 420.

420 minutes divided by 270 gives you a cycle time of 1.56 minutes.

So if you take this perspective, what are we saying?

We're saying that the 30 watches and

1.56 minutes per watch, the additional time required would be 46.8.

What's the difference between this and the previous perspective?

In the previous perspective, we said that they were producing still at

the rate of each watch was being produced at the rate of 1 every 1.4.

And here we're saying that each watch is being produced at 1 watch requiring

1.56 because they're simply working at 90% of the efficiency throughout the time so

it requires 46.8 minutes for the additional watches to be manufactured.

And again, we're gonna talk about the assumptions in a little bit.

But let's take this alternative perspective.

And you may have gone through a different calculate,

slightly different calculation but getting out the same result.

So this perspective says that 90% equals 7 hours.

So you worked at 90%, the 90% gives you 7 hours.

So what is 100%?

That would be 7.78 hours.

So you would need an extra 0.78 hours to accomplish that production and

that would again come back to 46.8 minutes which I'll go back to

the previous slide that we had over here to look at the previous calculation.

It gave us exactly the same number, which is 46.8 minutes.

So you must already be thinking about the difference between the assumption that

we're making here versus the assumption that we made in the previous perspective,

where we said that it takes 42 extra minutes.

Now we're saying 46.8.

So this different calculation gives you 46.8 minutes.

Talking about the labor cost, this is simply taking the idea that every

additional minute is going to cost you at the rate of 22.50 per hour.

So if you took perspective one you said that it takes 42 minutes,

there were 5 people working.

So 42 divided by 60 converted into minutes, 5 workers and

then you multiply by 22.50 because that's the overtime rate.

It's 50% more than the usual rate of $15, so it's 22.50,

and that gives us 78.75 additional cost for the day.

So original cost of paying the employees for

the full 7 hours is 525 you add the 78.75 and

that gives you the total cost for 300 units.

So per unit cost of $2.0125, so

$2.01 taking the second perspective if you remember

we talked about some additional time with the second perspective.

So it wasn't quite 42 minutes it was 46.8 minutes.

And there we're saying that 46.8 divided by 60 converting to 46.8 into hours and

then multiplying that by 22.50 and 5 workers.

So that gives us $87.75, a little bit higher than the first perspective.

Total cost 525 plus 87.75 for 300 units gives us $2.04.

So a $0.03 difference between perspective one and perspective two.

Now, let's go back to the idea of their assumptions.

So we said we had made some assumptions and we didn't talk about it earlier, so

let's go to that idea and see what those assumptions would be.

And you would've pretty much guessed what the assumptions were for

the two perspectives.

For the first one,

we were assuming that when there is overtime they are working at 100%.

So they are not going to continue to work at that shortfall at which

they were working earlier, so they're working at 100% during the overtime.

In the second perspective what you would have implied if you did

the calculation that way, is you would have said that when they work extra,

they continue to work at that 90% rate.

So that would be the assumption, one of these two assumptions would be

relevant based on what calculations that you would have come up with.

The second assumption that you may or

may not have thought about is that the line stoppage is to the same extent.

That the balance that we had In the line continued during overtime and

that the line stoppage was also the same extent in terms of the balance.

So the line stopped equally for

everyone who was working in that assembly line.

So that's why it's spread equally across the five and

it was spread equally across the five in the overtime as well.

So this is another assumption that you may have thought of.

And you were asked to think of at least one assumption so either one of these he

would've thought of would be adequate, but technically speaking you would

have to assume both of these things for these calculations to work out.