A machine shop is considering combining machining and turning centers into a single Mazak Multi-Tasking machine center. Multitasking in the machine world is the combining of processes that were traditionally processed on multiple machines onto one machine. The ultimate goal is to turn, mill, drill, tap, bore, and finish the part in a single setup. The total investment cost is RM6 million with following anticipated cost savings: Current Cost (% saved) Savings Setup $340 000 75% Scrap/Rework 63 530 80% Operators 228 000 100% Fixturing 190 000 80% Programming time Floor space 85 000 75% 40 000 80% Maintenance 50 000 70% Coolant 20 000 65% Inspection 124 926 100% Documentation 10 000 65% Expediting 30 000 80% Total Annual Savings Most machine shops typically use 20 years and assume a 25% residual value at the end of the project life. It is also very common for a learning curve to take place in operating a complex new machine. To allow for the learning curve, assume that only 60% of the full potential savings of total annual savings occur during the first to third year and 80% occur during the fourth to eighth year. The firm's MARR is known to be 12% per year. You have been asked by the president of the company to evaluate the economic merit of the acquisition.
A machine shop is considering combining machining and turning centers into a single Mazak Multi-Tasking machine center. Multitasking in the machine world is the combining of processes that were traditionally processed on multiple machines onto one machine. The ultimate goal is to turn, mill, drill, tap, bore, and finish the part in a single setup. The total investment cost is RM6 million with following anticipated cost savings: Current Cost (% saved) Savings Setup $340 000 75% Scrap/Rework 63 530 80% Operators 228 000 100% Fixturing 190 000 80% Programming time Floor space 85 000 75% 40 000 80% Maintenance 50 000 70% Coolant 20 000 65% Inspection 124 926 100% Documentation 10 000 65% Expediting 30 000 80% Total Annual Savings Most machine shops typically use 20 years and assume a 25% residual value at the end of the project life. It is also very common for a learning curve to take place in operating a complex new machine. To allow for the learning curve, assume that only 60% of the full potential savings of total annual savings occur during the first to third year and 80% occur during the fourth to eighth year. The firm's MARR is known to be 12% per year. You have been asked by the president of the company to evaluate the economic merit of the acquisition.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:A machine shop is considering combining machining and turning centers into a single
Mazak Multi-Tasking machine center. Multitasking in the machine world is the
combining of processes that were traditionally processed on multiple machines onto
one machine. The ultimate goal is to turn, mill, drill, tap, bore, and finish the part in a
single setup. The total investment cost is RM6 million with following anticipated cost
savings:
Current Cost
(% saved)
Savings
Setup
$340 000
75%
Scrap/Rework
63 530
80%
Operators
228 000
100%
Fixturing
190 000
80%
Programming time
85 000
75%
Floor
space
40 000
80%
Maintenance
50 000
70%
Coolant
20 000
65%
Inspection
124 926
100%
Documentation
10 000
65%
Expediting
30 000
80%
Total Annual
Savings
Most machine shops typically use 20 years and assume a 25% residual value at the end
of the project life. It is also very common for a learning curve to take place in operating
a complex new machine. To allow for the learning curve, assume that only 60% of the
full potential savings of total annual savings occur during the first to third year and
80% occur during the fourth to eighth year. The firm's MARR is known to be 12% per
year. You have been asked by the president of the company to evaluate the economic
merit of the acquisition.
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