Cycle Time and Velocity, MCE

Computador has a manufacturing plant in Des Moines that has the theoretical capability to produce 243,000 laptops per quarter but currently produces 91,125 units. The conversion cost per quarter is $7,290,000. There are 60,750 production hours available within the plant per quarter. In addition to the processing minutes per unit used, the production of the laptops uses 15 minutes of move time, 16 minutes of wait time, and 5 minutes of rework time. (All work is done by cell workers.)

Note: Assume that the company identifies poor plant layout as the root cause of move time.

Required:

1. If the plant layout is improved by reducing , then MCE will . Then conversion cost per unit will .
2. Assume that you set an MCE target of 50 percent, based on the improvement strategy described above. This implies an MCE ratio of: