A process engineer is considering two options for a new product line. One of the options must be chosen. • To make a unit in-house, equipment costing $250,000 must be purchased. It will have a life of 4 years, annual operating costs of $80,000, and a salvage value of $95,000. Each unit will also cost $40 to manufacture. Buying the unit externally will cost $100 per unit. The company's MARR is 12% per year. a. If the anticipated volume is 2000 units per year, what is the annual equivalent cost for making the item in-house? [Select] b. If the anticipated v [Select] $222,430 [Select] $142,430 $182,430 $202,430 $262,430 e engineer should
A process engineer is considering two options for a new product line. One of the options must be chosen. • To make a unit in-house, equipment costing $250,000 must be purchased. It will have a life of 4 years, annual operating costs of $80,000, and a salvage value of $95,000. Each unit will also cost $40 to manufacture. Buying the unit externally will cost $100 per unit. The company's MARR is 12% per year. a. If the anticipated volume is 2000 units per year, what is the annual equivalent cost for making the item in-house? [Select] b. If the anticipated v [Select] $222,430 [Select] $142,430 $182,430 $202,430 $262,430 e engineer should
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![A process engineer is considering two options for a new product line. One of the options must be
chosen.
• To make a unit in-house, equipment costing $250,000 must be purchased. It will have a life of 4
years, annual operating costs of $80,000, and a salvage value of $95,000. Each unit will also
cost $40 to manufacture.
Buying the unit externally will cost $100 per unit.
The company's MARR is 12% per year.
a. If the anticipated volume is 2000 units per year, what is the annual equivalent cost for making
the item in-house?
[Select]
b. If the anticipated v
[Select]
$222,430
$142,430
[Select]
$182,430
$202,430
$262,430
e engineer should
b. If the anticipated volume is 2000 units per year, the engineer should
[Select]
[Select]
Either option is acceptable
Buy the unit externally
Not enough information to decide
Neither option is acceptable since the annual equivalent worth of both is negative
Purchase the equipment and make the unit in-house](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F649e3b5f-d82f-4a82-a788-6a6fb382daac%2Faab4c645-426a-4a7b-926f-ccb04c16fb8c%2F1nwhlno_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A process engineer is considering two options for a new product line. One of the options must be
chosen.
• To make a unit in-house, equipment costing $250,000 must be purchased. It will have a life of 4
years, annual operating costs of $80,000, and a salvage value of $95,000. Each unit will also
cost $40 to manufacture.
Buying the unit externally will cost $100 per unit.
The company's MARR is 12% per year.
a. If the anticipated volume is 2000 units per year, what is the annual equivalent cost for making
the item in-house?
[Select]
b. If the anticipated v
[Select]
$222,430
$142,430
[Select]
$182,430
$202,430
$262,430
e engineer should
b. If the anticipated volume is 2000 units per year, the engineer should
[Select]
[Select]
Either option is acceptable
Buy the unit externally
Not enough information to decide
Neither option is acceptable since the annual equivalent worth of both is negative
Purchase the equipment and make the unit in-house
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