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IT-390 Labor Analysis

IT-390 Labor Analysis. Introduction. Direct labor 10% of product cost Hardest part of an estimate Labor costs are sporadic Classical methods for estimation of labor costs 1) Time Study (Stop Watch) 2) Standard Data (Man-hour Reports) 3) Predetermined Time Standards and Formulas

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IT-390 Labor Analysis

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  1. IT-390 Labor Analysis Ch 2

  2. Introduction • Direct labor 10% of product cost • Hardest part of an estimate • Labor costs are sporadic • Classical methods for estimation of labor costs • 1) Time Study (Stop Watch) • 2) Standard Data (Man-hour Reports) • 3) Predetermined Time Standards and Formulas • 4) Work Sampling

  3. Labor • Direct Labor • Directly linked to the manufactured part • Hands on Labor, or Touch Labor; Physical "touching" of the part and adding value

  4. Labor • Indirect Labor • Overhead charge • Engineers, first-line supervisors, managers, production control, quality control, etc. • Cost of running equipment, utilities, Inspection, indirect materials, etc.

  5. Frederick (1856-1915) Frank (1868-1926) Lillian (1878-1972) Measured Time

  6. Measured Time • Evolve from Production Study to: • 1) Time Study (Stop Watch) • 3) Predetermined Time Standards and Formulas • 2) Standard Data (Man-hour Reports) • 4) Work Sampling

  7. Time Study • Analysis of an operation • Standardize methods, equipment, and conditions • Determine number of standard hours

  8. Time Study • The procedure is: • a) Methods analysis - improve if necessary • b) Record data - title block, elements of work, etc • c) Separate the operation into elements • d) Record time consumed by each element • e) Rate the pace or tempo • f) Determine the allowances • g) Convert elements to time standards

  9. Time Study • The equations are: • Operator Performance Factor = %Rating Factor 100% • Std Time = (time)(Operator Performance Factor)(Allowance Factor) or • Std Time = (% Working Time)(Total Working Time)(Performance Factor)(Allowance Factor) . Total # pieces produced

  10. Time Study • Equipment used - clipboard, stopwatch, and data collection forms • Training is required • Several cycles observed - average • Number of cycles - judgment call.

  11. Time Study • Allowances • Personal body needs (around 4-5%), interruptions (around 2-8%), and fatigue (0-25%). • These allowances are called PF&D (Personal, Fatigue, and Delay) • Typical PF&D allowance is 15%, but can vary from 8-35%.

  12. Time Study • PF&D is determined by the equation:

  13. Pre-determined Time Data • MTM (Methods, Time, and Management) • MTM most widely used method • Developed five generations of MTM systems for estimating • Subdivides operator motions into small increments / easily measured. • Drawback - time intensive - training • Very common and powerful method

  14. Man-hour Reports • Time standards called standard data. • Standard data - collected by company on its own operations for similar activities. • Deal with non-repetitive work • Reports are generated from job tickets or Foreman reports. • Cost codes are assigned • Cost database

  15. Problem 2.9 a (pg. 70) Determine the standard labor hours per drawing. Man-hrs/Print = 7.0(1) + 19.0(1) + 38.0(2) + 1.5 (¼) + 27.0(½) = 115.875 min. Adding in the allowance (15%): 115.875 (1.176) = 136.27 min. or 2.27 hrs. (136.27/60) Standard labor hours per drawing: 2.27 hours

  16. Problem 2.9 b (pg. 70) How many aids will be required for 2500 drawings, and with a $25/hr rate, what will be the budget request? Standard labor hrs required:136.27 min x 2500 = 340675 min or 5678 hrs (340675/60) Hours in a year: (52 wk/yr) (40 hrs/wk) = 2080 hrs/yr 5678 / 2080 = 2.73 or 3 aids will be required Budget needed: 5678 hrs x 25 $/hr = $141,950 or $142,000

  17. Work Sampling • Method to count how often certain events happen • Statistics - normal distribution form • Statistics - accuracy of our observations • Number of observations made

  18. Equations 2.10 & 2.11 on page 49 Eq. 2.10 Eq. 2.11 and: R.A. = I/2pi Where: N= sample size Pi= proportion of time spent on the activity we’re interested in I= Internal estimate; two values between which we have confidence that the true value of “p” will lie Z= a value form a standardized normal distribution table reflecting the confidence (interval) level Confidence Level: likelihood that the true value of “p” lies within “I” R.A.: Relative Accuracy

  19. Problem 2.13 (pg. 71) How many observations are necessary? Given: Confidence level = 95%Z = 1.96 (from Z values on pg. 38) Relative Accuracy = +/- 5% Pi = idle time = 25% RA = I/2pi = I = 2pi RA (using Algebra) I = 2(.25)(.05) = .025 Ni = 4(1.96)² (.25) (1-.25) (.025)² Ni = 4610 observations

  20. Problem 2.14 a (pg. 71) To get a 0.10 interval on work observed by work sampling that is estimated to require 70% of the worker’s time, how many random observations will be required at the 95% confidence level? I = .10 95% confidence level  Z = 1.960(from Z values on pg. 38) Pi = .70 Ni = 4(1.96)² (.7) (1-.7) = 322.7 or 323 (.10)²

  21. Problem 2.14 b (pg. 71) If the average handling activity during a 20-day period is 85% and the number of daily observation is 45, then what is the interval allowed on each day’s percent activity? Confidence level is 90%. Pi = .85 (handling) N = (45 obs/day) (20 days) = 900 obs Z = 1.645 (pg. 38) = 0.039 or 3.9% For a confidence level of 99%, just plug in the new “Z” value.

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