1. A manager must decide which type of machine to buy, A, B, or C. Machine costs
ID: 2818920 • Letter: 1
Question
1. A manager must decide which type of machine to buy, A, B, or C. Machine costs are as follows: Machin Cost 50,000 $40,000 90,000 Product forecasts and processing times on the machines are as follows: PROCESSING TIME PER UNIT minutes Annual Product Demand 18,000 14,000 8,000 32,000 4 4 Assume that only purchasing costs are being considered. Which machine would have the lowest total cost, and how many of that machine would be needed? Machines operate 10 hours a day, 250 days a year Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $10 each, B machines have an hourly operating cost of $11 each, and C machines have an hourly operating cost of $12 each. Page 218Which alternative would be selected, and how many machines, in order to minimize total cost while satisfying capacity processing requirements? a. b.Explanation / Answer
a. If we only consider the purchasing cost and nothing else then the machine cost is lowest for Machine B which is $ 40,000.
So if we use only machine B then 2500 hours will be used in machine B only, so the time will be as follows:-
Product 1 = 18000*4/60 = 1200 hours
Product 2 = 14000*4/60 = 933.33 hours
Product 3 = 8000*6/60 = 800 hours
Product 4 = 32000*2/60 = 1066.67 hours.
Total Hours required in machine B for satisfying the Annual Demand = sum of above = 4000 hours.
So 2 machine B will be required for satisfying the demand.
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