You work for a company that manufactures steel parts for the auto industry. One

Question

You work for a company that manufactures steel parts for the auto industry. One of your biggest customers has asked you to help out with a backorder problem they have. They want you to take on a one-time order to produce 300,000 plastic parts Because your company does not have the machinery required to produce the part, and it is just a one-time contract, it has been decided to rent a machine. You check local suppliers and for the best machine available, the following information is provided Machine A Machine B Rental Cost - Setup Rental Cost/ month Heating Fuel Cost/ Hour Parts/ Hour Defect Rate 2,000.00 2,500.00 8,000.00$ 8,750.00 18.50 120 8% 14.00$ 100 4% *Note: Machines can only be rented by the full month not by the day You will require an operator to run the machine at $25 / hour and you will have the machine in operation for two shifts per day for five days a week. Each shift is 8 hours long, however with lunch and coffee breaks the machine will only be producing parts for 7 hours per shift. Each part weights 250 grams and the required plastic costs $0.82 per kg. Defective parts will have to be shipped to a recycling centre. The hauling company charges $80 per trip and can take a maximum of 1000 kg per trip For both Machines answer the following questions a) How many parts in total will you have to make so you can ship 300,000 parts? b) How many hours will you need to operate the machine for? c) How many months will it take you to finish the job (assume exactly 52 weeks per year)? d) What will be the total cost to rent the machine? e) What will be the total cost of the material? f) What will be the total cost of labour? g) What will be the total operating cost, including both labour and heating fuel h) What will be the total recycling cost, assuming defective parts use the same amount of material as good parts? Which machine do you recommend renting? Justify your answer Your boss has asked you to put together the quotation for the customer using a 30% profit markup. What is the grand total you will bill the customer for the job?

Explanation / Answer

(a)

* 300000 / (100% - 4%) = 312500

(b)

* 312500 / 100 = 3125

(c)

* ROUNDUP(3125 / 303.33,0) = 11

(d)

* $8,000 x 11 = $88,000

(e)

* 250 x 312500 = 78125000
** $0.82 x 78125000 / 1000 = $64,062.5

(f)

* 3125 x $25 = $78,125

(g)

* 3125 x ($25+$14) = $121,875

(h)

-------------------------------------

Based on total cost consideration, Machine B is to be selected.

With a 30% markup, the quotation should be $266,865 x 1.3 = $346,924 for 300,000 parts.

So, quote for $346,924 / 300,000 = $1.16 per part.

M/C A M/C B Parts required 300000 300000 Defect rate 4% 8% Parts produced (including the defects) 312500* 326087

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.