2.2. Unit Cost Calculation Process

Now let us find the balance number of trucks needed for one loader. So, that depends upon your the balance number of trucks per loader going to be serve by one loader is equal to your truck cycle time divided by load of cycle time. So, you have estimated the truck cycle time earlier, so estimated it is 39.5. The truck cycle time is 39.5 and the loader cycle time is 5.5, we have calculated the loader cycle time as 5.5. So, this gives me the balance number of 7.18.

To calculate the balance number of trucks needed for one loader, you divide the truck cycle time by the loader cycle time. Here, the truck cycle time is given as 39.5 minutes, and the loader cycle time is 5.5 minutes. This calculation gives you the balance number, which helps in determining how many trucks are needed to optimally load the material using one loader. The balance number of trucks is calculated to be approximately 7.18.

Imagine you're running a delivery service with a single van and multiple packages. If your van takes 30 minutes to make a delivery (like truck cycle time) and it takes you 5 minutes to load a package into the van (like loader cycle time), you'd need to find the right amount of packages to keep the van busy but not overloaded. Here, you're figuring out how many deliveries per hour can be efficiently managed with one van.

So, just to give you a better explanation I am just working out what will be the economics when I go for different number of trucks. Say if I go for 5 number of trucks 6, 7, 8 and 9, how the productivity will vary, how the unit production cost will vary? We will work it out and see...

The text discusses examining how productivity and unit production costs change as different numbers of trucks (5 to 9) are considered. It is said that when the number of trucks is less than or equal to the balance number, the productivity is governed by the truck cycle time; however, if exceed the balance number, productivity will be limited by the loader. Calculating how each scenario affects both productivity and costs helps illustrate the economics of equipment usage.

Think of this like a restaurant kitchen. If you have only two cooks (trucks) to prepare meals, each cook must do their part. If you add more cooks than the kitchen can handle or without enough orders, they might end up not working efficiently, just waiting for tasks (like trucks waiting for loaders). The overall productivity is best when the number of cooks matches what the restaurant can effectively serve at once.

The unit cost here will be calculated for the different combinations. So, how to calculate the total unit cost for the truck loader combination I need the input data, so the input data is given to you what is the cost associated with the loader and the truck. The hour...

Say for first for 5 number of trucks, how will you calculate the total cost? Total cost is nothing but 5 multiped what is the hourly cost of truck 1650 plus there is only one loader 1 multiplied by 2700.

To calculate the unit production cost, first gather the hourly costs of the loader and trucks. For example, if the loader costs 2700 per hour and each truck costs 1650, the total cost can be calculated by multiplying the number of trucks by their hourly cost and adding the cost of one loader. The resulting total cost is then divided by the expected productivity to derive the unit production cost for that configuration.

This is similar to calculating how much it costs to run a car for a trip. If gas (loader) costs $2.70 per gallon and the car (truck) uses$1.65 per mile, you’d want to know how much it costs you for the entire journey based on your mpg (productivity). Understanding these costs helps you decide whether a trip is worth making.

But beyond the balance number, so you can see that number of trucks are more so the truck will be waiting for the loader unless the loader is available your truck cannot do the job. So, the productivity here will be controlled by your loader.

When the number of trucks exceeds the balance number, trucks will experience downtime as they must wait for the loader to become available. As a result, the productivity is capped by the loader's capacity. Thus, beyond the balance point, adding more trucks does not contribute to increased productivity but rather incurs additional costs without a return, leading to an inefficient operation.

Imagine an assembly line where workers wait for a machine to provide components. If too many workers are waiting for only one machine, the extra workers might be doing nothing, yet still being paid. The same happens with trucks – if you have more trucks than loaders can handle, you are wasting resources and money.

When the number of trucks is 5 though the total cost is less in this case, but the productivity is also less, that is why you can see that the unit cost is high. But as your number of trucks increases you can see that the productivity increases significantly, that is why your unit cost of production reduces, it is reducing.

The text illustrates how total costs and productivity vary with the number of trucks. Initially, fewer trucks might mean lower total costs but also lower productivity, resulting in higher unit costs. As more trucks are added, productivity increases, leading to lower unit costs. However, once the number of trucks exceeds the balance point, productivity stagnates while costs continue to rise due to increased truck expenses.

Consider a student's study group. If there are too few students, progress is slow (low productivity). As more students join, the work speeds up, and tasks get completed faster (higher productivity, lower individual responsibility). However, if the group gets too large, some students might just sit around, leading to frustration and inefficiency despite having a high number of helpers.

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