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INTRODUCTION TO IO : EXERCISE 1
- Statement :
⮲ The machine we will work on uses an average power of 18kWh when it runs (0.08€ per kWh)
⮲ Purchasing price of the machine: 150 k€
⮲ Estimated depreciation period: 3 years
⮲ Schedule for using the machine: 2 teams during 7 hours, 5 days a week.
⮲ Hourly rate of the operator (very qualified) working on the machine: 13€/h (+42% of employer charges)
⮲ Yearly expense for cutting tools for this machine: 8000€
⮲ Yearly expense soluble oil: 1500€
⮲ Yearly expense of « hydraulic » oil (gearbox, motors, cylinders, etc.): 1000€
⮲ Total yearly cost for maintenance parts: 3500€
⮲ Total labour costs (internal and external): 2000€

- Questions :
Calculate the Hourly Rate (HR) of this machine and calculate the cost distribution percentage.

Hourly Rate (euros/h) Cost distribution (%)

Machine (depreciation) 15,20 38
Labor costs 18,46 46
Tools and oil for the machine 2,87 7
Maintenance 1,98 5
Energy 1,44 4
TOTAL 39,95 100

Inputs to integrate in the calculation:

- 5 weeks closed in the year
- The 3 last lines concern maintenance
- The last line is a yearly expense
- Only one operator can work on the machine at the same time

Depreciation: 150 000 € / 9 870 H = 15,20 €/H

Operator: 13 € x 1,42 = 18,46€/H

Tools and oil for the machine: 9 500€ / 3 290 H = 2,87€/H

Maintenance: 6 500€ / 3 290 H = 1,98 €/H

Energy: 18 kW x 0.08 €/KW = 1,44 €/H

Solène FANJUL Industrial Organization - TD1

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INTRODUCTION TO IO: EXERCISE 2

Statement :
You are a newcomer in the industrial methods service and your manager want to assess your understanding of the
case manufacturing. He asks you to make the routing of a watchcase with the information he gave you during the
visit of the production line.
Your manager gives you a standard document to be completed.
Here are the information you noted during the visit:
- For the case manufacturing, the company purchases stainless steel bar Duplex 904L
o Purchasing price: 30€/kg
o Dimensions and sketch of the bars: 60x12x1005

- Reject rate = 2% and Scrap rate = 3%

- There are 4 operations to produce the case:
o Die-cutting / set up time: 4h / Hourly capacity: 10 units
o Annealing (thermic treatment) / set up time: 1h / Hourly capacity: 200 units
o Milling / set up time: 3h / Hourly capacity: 20 units
o Polishing / set up time: 2h / Hourly capacity: 10 units
- The production orders are made for 2000 units

🡺Complete the following routing sheet

Then, your manager asks you to calculate the cost price of the watch with the information contained in the routing.

He also gives you the following information:

- Hourly rate of the machines:

o Die-cutting: 600€/h
o Annealing: 150€/h
o Milling: 300€/h
o Polishing: 100€/h

🡺Calculate the cost price of the case

- Other internal operations:

o Assembly of the watch head with an hourly output of 4 units/h and an hourly rate of 80€/h
o Final assembly with an hourly output of 10 units/h and an hourly rate of 80€/h
- Price of the purchased components: Movement 360€ ; Needles 25€ ; Bracelet 48€

🡺Calculate the cost price of the watch

You want to reduce the cost price of the watch, what action plan do you propose?

Production qty N° SHEET DESIGNATION N° PLAN N° ITEM

Solène FANJUL Industrial Organization - TD1

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2000 1/1 Watch case ? ?

FINAL PRODUCT MATERIAL DESIGNATION Creation Expiry

WATCH DATES
Duplex 904L 16/09/20 16/09/20

N°
Unit qty Material Code Operator Name
Warehouse

0,24kg ? ? SFA

N° UT for 100
Workshop PHASES DESCRIPTION Workstation Tool Setup time
Phase units

10 D Die-cutting ? ? 4H 10H

20 A Annealing ? ? 1H 0.5H

30 M Milling ? ? 3H 5H

40 P Polishing ? ? 2H 10H

Modifications Expiry dates

ROUTING SHEET ENTREPRISE

Unit qty of steel (we take a density of 7,85):

- Mass of 1 steel bar = 60 x 12 x 7,85 x 1,005 / 1000 =5,68 kg
- Nb of cases per bar = 1000/40 = 25
- Mass of steel for 1 case : 5,68/25 x 1,02 (reject rate) x 1,03 (scrap rate) = 0,24kg

Solène FANJUL Industrial Organization - TD1

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Cost price of the case:

- Cost price of the steel: 0,24 x 30 = 7,2€
- Operation costs for 100 cases:
Phase UT for 100 items (H) HR (€/H) Cost price (€)
D 10,2 600 6120
A 0,55 150 82.5
M 5,15 300 1545
P 10,1 100 1010
TOTAL 8757,5

Calculation of the UT for 100 items:

I considered that we always produce 2000 units batches, so the set up time is divided by 2000 to estimate the time
for 1 case (and so divided by 20 to estimate the time for 100 cases).
If we had smaller batches, the unit time will thus be different.

⇨ Total cost price for 100 cases = 720 + 8757,5 = 9477,5 €

Cost price for other operations for 100 watches:

Operations UT HR CP

Assembly 25 80 2000

Final assembly 10 80 800

Cost price for components: The price given for each component is for 1 component, so you just have to x100 to
have the price for 100.

Cost price of 100 watches:

100 watches CP (euros) Distribution (%)

Cases 9477,5 17

Other operations 2800 5

Components 43300 78

TOTAL 55577,5 100

⇨ Suggestion to lower the CP: Review the sourcing of the components (78% of the watch price)

Solène FANJUL Industrial Organization - TD1