The process engineer at Strowbridge Metal works has the choice of machining a pa

Question

The process engineer at Strowbridge Metal works has the choice of machining a particular part on either of two machines. Orders for this part re received regularly, but the order size varies.. When the order is processed on machine A, four sequential set up operations of 1 hour each are required.Once set up, the machining time is 0.50 hours per unit. When the order is processed on machine B, eight sequential set up operations of 0.75 hours each are required. Once set up, the machining time per unit is 0.55 hours. The hourly wage raes for operators are $20 and $18 for machine A and machine B, respectively. The hourly overhead rates, including set up time, are $30 and $27 for machine A and Machine B, respectively. a) Which machine is prefwrred if the order size is 100 units? b) Which machine is preffered if the order size is 500 units c) What is the breakeven order size

Explanation / Answer

Processed A B mac time 0.5 0.75 time per unit 0.55 0.55 wages 20 18 Wages/unit 5.5 7.425 For 100 units 550 742.5 Overhead 30 27 Total cost 580 769.5 (per hour) For 500 units 2750 3712.5 BE size 5.4545455 3.636364

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