Reference no: EM132238050

Alpha Assemblies produces a wide variety of products in their central Nebraska facility. Many of these products fit within a line of standard truck and trailer parts. Within this is a set of hitches that can be made in two sizes (1-1/4 and 2) and three strengths (light duty, medium duty, and heavy duty). All of the hitches in this line have "natural" finishes so no additional steps are necessary after they are cast. The machine used to cast these six hitch variations is available for 2000 hours per year. Operators are paid $15.00 per hour including benefits. Simone is working to establish her reputation at Alpha Assemblies as part of her internship opportunity. She is looking for a way to improve the operations. She has been working on the hitch project and is looking at possible ways to cut costs. At this point she has studied the processes and their associated costs, and completed forecasts for the next year's demand.

Hitch C has a forecast annual demand for next year of 7,000 units and a current batch size of 1,500 units. It takes 0.0400 hours to produce each unit and the setup time for a production run is 6.5 hours. Hitch C has a holding cost of $3.95 per unit per year. The value of each Hitch C as it is stored in inventory is $36.26 per unit. As with Hitches A and B, it takes 1 worker to perform the setup and no other costs are incurred in the setup process. On average, how much more cash is tied up in inventory using the current batch size for Hitch C than would be tied up if batch sizes were determined using EOQ as Simone suggests? Note: this is not the holding cost, it is the actual value of inventory on hand on average. Don't round any numbers in the middle of the problem. Provide your answer to two (2) decimal places.