Question: A batch of large castings is processed through a machine shop. The batch size is 20. Each raw casting costs $175. There are 22 machining operations performed on each casting at an average operation time of 0.5 hr/operation. Setup rime per operation averages 5 hr. The cost rate for the machine and labor is $40/hr. Nonoperation costs (inspection, handling between operations. etc.) average $5/operation per part. The corresponding nonoperation time be-tween each operation averages two working days The shop works five 8 hr day/wk, 52 wk/yr. Interest rate used by the company is 25% for investing in WIP inventory, and storage cost rate is 14% of the value of the item held. Both of these rates are annual rates Determine the following:
(a) manufacturing lead time for the batch of castings;
(b) total cost to the shop of each casting when it is completed, including the holding cost; and
c) total holding cost of the batch for the time it spends in the machine shop as WIP.