Setup time for a product is 12 hours.A firm that uses JIT and produces the same product has reduced setup time by 1 hour.Setup labor is $20 per hour.If the company wants to reduce non-value-added costs by 40 percent next year, the currently attainable standard for setup time would be
A) 7.6 hours.
B) 7.2 hours.
C) 6.6 hours.
D) 4.8 hours.

Question

Quizplus · Accepted Answer

The correct answer is A.The company wants to reduce non-value-added costs by 40 percent next year. The current setup time is 12 hours, and the setup labor is $20 per hour. So, the current non-value-added cost is 12 * 20 = $240. To reduce this cost by 40 percent, the new non-value-added cost should be $240 * 0.6 = $144. This means that the new setup time should be $144 / 20 = 7.2 hours.

Setup Time for a Product Is 12 Hours