A jalapeno canning company is faced with a make/ buy decision. Cardboard shipping cartons can be purchased for $0.60 each or made in-house. If manufactured, two machines will be required. Machine X will cost $20,000 and have a life of 6 years with a $2000 salvage value. Machine Y will cost $11,000 and have a life of 4 years with no salvage value. The annual maintenance cost for machines X and Y are $6000 and $5000 per year, respectively. A total of four operators will be required for the two machines at a rate of $22.50 per hour per person. In a normal 8-hour day, the four operators and two machines can produce 1000 cartons. The variable cost per carton associated with the in-house option is closest to: (a) $0.0625 (b) $0.10 (c) $0.72 (d) $0.81
A jalapeno canning company is faced with a make/
buy decision. Cardboard shipping cartons can be
purchased for $0.60 each or made in-house. If manufactured,
two machines will be required. Machine
X will cost $20,000 and have a life of 6 years with a
$2000 salvage value. Machine Y will cost $11,000
and have a life of 4 years with no salvage value. The
annual maintenance cost for machines X and Y are
$6000 and $5000 per year, respectively. A total of
four operators will be required for the two machines
at a rate of $22.50 per hour per person. In a normal 8-hour day, the four operators and two machines can
produce 1000 cartons. The variable cost per carton
associated with the in-house option is closest to:
(a) $0.0625
(b) $0.10
(c) $0.72
(d) $0.81
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