An automobile manufacturer is considering a change in an assembly line that shou
ID: 385445 • Letter: A
Question
An automobile manufacturer is considering a change in an assembly line that should save money due to areduction in labo and material cost. The change involes theinstllation of four new robots that will autonatically insall windshies The cost of the four robots,including instalation and initial progranming,is $400000, Cument practice is to amortize theinitial cost of robois over two years on stge basis,The proess engineereshinates dlat one ul-ime tecdnician willbe needed to monitoi, mainain,and reprogran the nobos on an ongoing bosis. This person will cost approximae- y$60,000peryear. Cumenly,the conpanyses fourfll-ine employees on this jobandeach makes about $52000peryerOne of these employeesisa material landler, andthisperson willstlbee ed with the new process To complicate maters, the process neineer estimates that the robots will apply the windshied sealing materia ina maner that will esultin a savingsof 0.25 perwindshield installed, How manyautomobiles need tob anatracive investinment? Due to the relaively short honizon,onotconsider the time value of mone prodluced overthe next two years tomake the new robotsExplanation / Answer
Answer:
Initial investment on 4 robots= 400,000
Maintenance cost of 4 robots for 1 year= 60,000 for engineer + 52,000 for material handler
Total maintenance cost 2 years = 2*112,000= 224,000
Total robots cost of two years= 400,000+224,000= 624,000
Current labor cost for 1 year= 4*52000 = 208,000
Total labor cost of two years = 416,000
Saving of windshield sealing material 0.25 per windshield
Therefore, extra cost of robots = 624,000-416,000 = 208,000
Therefore, total cars to be produced to match the robots cost= 208,000/0.25= 832,000
832,000 automobiles should be produced to break even the robots cost in two years
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