A bicycle component manufacturer produces hubs for bike wheels. Two processes are possible for manufacturing, and the parameters of each process are as follows: Assume that the daily demand for hubs allows all defect-free items to be sold. Additionally, defective hubs cannot be sold and their material cannot be recovered anymore. Find the process that minimizes the total cost per piece if each part is made from $4 worth of material. Both processes are fully automated, and the variable overhead cost is charges at $40 per hour.
A bicycle component manufacturer produces hubs for bike wheels. Two processes are possible for manufacturing, and the parameters of each process are as follows: Assume that the daily demand for hubs allows all defect-free items to be sold. Additionally, defective hubs cannot be sold and their material cannot be recovered anymore. Find the process that minimizes the total cost per piece if each part is made from $4 worth of material. Both processes are fully automated, and the variable overhead cost is charges at $40 per hour.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A bicycle component manufacturer produces hubs for bike wheels. Two processes are possible for manufacturing, and the parameters of each process are as follows:
Assume that the daily demand for hubs allows all defect-free items to be sold. Additionally, defective hubs cannot be sold and their material cannot be recovered anymore. Find the process that minimizes the total cost per piece if each part is made from $4 worth of material. Both processes are fully automated, and the variable overhead cost is charges at $40 per hour.
Transcribed Image Text:Process 1
Process 2
Production rate
Daily production time
Percent of parts rejected 20%
35 parts/hour 15 parts/hour
4 hours/day
7 hours/day
%6
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