In a local assembly plant, they have an assembly system with 7 build stations. Each unit passes through a station where more labor is added to the build and items are installed. While the units are flowing through the stations, they are considered WIP. Each station can hold 1 unit of product. Between each station, there is space to hold an additional 2 units. So Theoretically, if each station overproduced into the subsequent station they could have potentially 21 units of WIP at any given point. Station 1 (1) + space between (2) + Station 3 (1 ) + Space between (2) .....And so on up to 7 stations (7 X3 = 21). This represents Maximum WIP.

Lets say, for evaluation purposes each unit is worth $1,500. So the WIP value at maximum is $31,500.The minimum WIP is to have a single unit in each station, and as one unit moves out of station7, all units move forward 1 slot, and a new unit starts on station 1. So the minimum WIP is 7 or $10,500. If rework is necessary, assume it costs $885 per unit to rework. Replacement costs are $1,500There are implications of having excess WIP. So a couple of math questions: The company is running at maximum WIP ($31,500). They discover on unit #22 that there is a serious flaw in the unit. The units need to be either reworked or scrapped.

QUESTION:

* What is the maximum scrap exposure with maximum WIP and with Minimum WIP?

* If rework is approved, what is the delta in rework costs between MAX WIP and MIN WIP?