lOCOXOMICS OF 'rKI.i;i'll<).\K IIKLAV Al'l'LK 'A'l'K )XS 225 



item. Tlic r(>sultiiit; iii(li\'i(lu;il ('I'toct may tlioii l)c stuted as 



Ca=^, (2) 



where Ca = cost penalty per uiiil due to administration, 



A = anmial administration cost for maintaining one code; in 



good standing, 

 ti = annual demand for a given code. 



1.212 Sr(-up Costs 



If only ont> kind of part or assembly were needed, it could be con- 

 tinuously built in the same way, with no time lost for changeover to 

 other parts, no particular bookkeeping necessary to control the proper 

 How of differing parts, and M-ith more mechanized action. Usually this 

 condition is far from realized in practice; nevertheless it represents the 

 peak of manufacturing economy, and may be taken as a standard of 

 reference for comparing all other less favorable conditions. The cost 

 ineurred, per item, due to its lot size, as against its cost if there were 

 always but one lot, will be called the "lot-size cost penalty." The manu- 

 facturing lot-size cost penalty per part for any particular process, then, 

 may be stated as follows: 



C'- = l, (3) 



= ?■ (4) 



n 



where Cl = lot size cost per item, 



*S' = cost of one "set-up", 



L = size of lot for which one set-up is made, 

 = n/^, 



n — annual demand for a given code, 



C = luimber of lots per year, or lot-frec|uency. 

 Equation (4) gives the cost over and above single-kind manufacture, so 

 far as lot-size is concerned. Hence, when values for each of these variables 

 can be established, the lot-size cost penalty for any particular process 

 can be determined. 



1.213 Over-all Lot-Size Costs, Related to Annual Demand 



Combining the results of e(|uations (2) and (4), the total cost penalty 

 per part due to lot-size is 



4. S( 

 C, = --\--. (5) 



n n 



