A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows: Machine Cost A $ 70,000 B $ 60,000 C $ 50,000
A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows: Machine Cost A $ 70,000 B $ 60,000 C $ 50,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A manager must decide which type of machine to buy, A, B, or C. Machine
costs (per individual machine) are as follows:
Machine Cost
A
$
70,000
B
$
60,000
C
$
50,000
Product forecasts and processing times on the machines are as follows:
PROCCESSING
TIME PER
UNIT (minutes)
Product Annual
A
BC
Demand
1
11,000
5
1 2
24,000
5
6 2
3
26,000
2
4 5
4
22,000
1
6 3
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a. Assume that only purchasing costs are being considered. Compute the total
processing time required for each machine type to meet demand, how many of
each machine type would be needed, and the resulting total purchasing cost
for each machine type. The machines will operate 8 hours a day, 240 days a
year. (Enter total processing times as whole numbers. Round up machine
quantities to the next higher whole number. Compute total purchasing costs
using these rounded machine quantities. Enter the resulting total purchasing
cost as a whole number.)
b. Consider this additional information: The machines differ in terms of hourly
operating costs: The A machines have an hourly operating cost of $13 each, B
machines have an hourly operating cost of $11 each, and C machines have an
hourly operating cost of $10 each. What would be the total cost associated with
each machine option, including both the initial purchasing cost and the annual
operating cost incurred to satisfy demand?(Use rounded machine quantities
from Part a. Do not round any other intermediate calculations. Round your
final answers to the nearest whole number.)
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