Question

Setup costs do not include

• A. Ordering cost or raw material
• B. Maintenance cost of the machines
• C. Cost of processing the work piece
• D. Labour cost of setting up machines

Answer 1

The correct option is C Cost of processing the work piece

When the units are produced within the production system, then the cost associated with bringing shut down system, agai into play is called setup cost. It includes maintenance cost, cost associated with arrangement of workers, raw material, tool extra, schedule chart preparation cost.

$\text{Points to Remember:}$

Ordering cost and setup cost are the same, both are denoted by the $C_0.$