In some manufacturing operation three types of boreholes for drilling may be use

Question

In some manufacturing operation three types of boreholes for drilling may be used. The cheapest is a stainless high speed steel (HSS), but has a shorter one of gold or another oxide of titanium nitride life. The purchase of HSS drills cost $ 3,500 under the conditions that would be used would last three months. The operating cost of these additions would be $ 2,000 per month. Holes gold oxide would cost $ 6,500 to would last six months, with an operating cost of $ 1,500 per month. The titanium nitride would cost $ 7000 and would last six months, costing $ 1,200 to operate. With an interest rate of 12% per annum, compounded monthly, what kind of hole should be used, according to the analysis of future value?

Explanation / Answer

HSS Gold Oxide titaniul Nitride Price per machine $ 3,500.00 6500 $              7,000.00 Life in month 3 6 6 Required no of machine for next 6 month 2 1 1 Cost of Purchase $ 7,000.00 $ 6,500.00 $              7,000.00 Interest @12% for 6 month $     315.00 $      390.00 $                 420.00 Operating Cost/Month 2000 1500 $              1,200.00 Total Cost 9315.00 8390.00 8620.00 So, Gold Oxide should be used. Interest for HSS: 12% on 3500 for 6 month 210 12% on 3500 for 3 month 105 Total $     315.00

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