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GE, a US company is planning to move the assembly of its gas range from US to S. Korea. It takes 4 hours of labor to assemble a gas range , both in US and S. Korea. Hourly labor rate in US is $ 30. The hourly labor rate in S. Korea is $ 10. Holding cost in US per gas range per week is $ 3. In S. Korea it is $ 2. In US, orders are placed with factory weekly with lead time of 3 weeks. In S. Korea, orders are placed with factory weekly with lead time of 8 weeks. Weekly demand is 450 gas ranges with standard deviation of 100. It operates with in stock probability of 0.995.
What would be the change in total holding and labor cost per gas range by moving assembly from US to S. Korea ? Show all formulas used, calculations and results.
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