ECONOMICS OF TELEPHOXE RELAY Al'l'LIC A TIOXS 



229 



u 



O 2 



0.3 0.4 0.5 0.6 0.8 1.0 1.5 2 

 RATIO LOT FREQUENCY TO OPTIMUM LOT FREQUENCY, 



Fig. 5 — Cost variations with variations from optimum. 



by rewriting equation (10) in terms of the values of fo and (\ just found 

 in equations (11) and (12). The result is 



C/C, = 



2 + D/U 



(13) 



where 



2^ S 



This relationship is seen to depend on annual demands, and also ad- 

 ministrative and set-up costs, which will be peculiar to each case. There- 

 fore, it will be necessary to use the equation with appropriate values of 

 these constants for each case that arises. Typical values for the two 

 previous illustrations are shown in Fig. 5. Inspection of these curves 

 shows that the cost penalty of departing from optimum lot-frequency is 

 somewhat variable depending on the ideal lot-frequency for the particular 

 case. Howe^'er, the higher ^•alues of lot-frequency, which produce the 

 highest penalties, are those most easily under control of the factory, 

 and variations averaging in excess of 2 or 3 to one from ideal are not at 

 all likely. When the ideal lot-frequency is low, manufactiu'ing control 

 is not so easy, but the cost penalty ratio of dejiarting from the ideal is 

 far less. From inspection of these curves, then, the value of C/Cq must 

 be judged by the conditions of each probU^m; a value of cost penalty 

 amounting to about 1.25 Co is often found to be a ciuite satisfactory 

 value to assume. 



Thus, (a) a method is available to the manufacturing engineer to 

 help plan optimum lot size, and (b) a method is available to the rela\^ 



