6. In Question 5, suppose the current operator can be replaced by a more efficie

Question

6. In Question 5, suppose the current operator can be replaced by a more efficient new operator, but the new operator is paid $30 per hour whereas the current operator is paid $24 per hour. The new operator can proces 10.2 units per hour. If a unit's time is considered to be worth $10 per hour, is it worth to replace the current operator with the new operator? Calculate the total cost of the current operator and the units' time and the total cost of the more efficient new operator and the units' time to answer this question.

Explanation / Answer

Let's assume we have 1000 units to be processed.

Current operator :

Units per hour = 9.4

Total hours taken = 1000/9.4 = 106.38

Total worth created = $10 * 1000 = $10,000

Total pay for operator = $24 * 106.38 = $2553.12

Net profit = $7446.88

New Operator :

Units per hour = 10.2

Total hours taken = 1000/10.2 = 98.04

Total worth created = $10 * 1000 = $10,000

Total pay for operator = $30 * 98.04 = $2941.2

Net profit = $7058.8

Hence, we see that the current operator is more economical.

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