Consider the following simplified production process for an electronic device. Demand = 50,000 devices/Year Price = $50 each Raw Material = $5/device Employee Wage = $25/hr Number of Employees = 5 (1/workstation) Each Employee Works 2,080 hrs/year (40 hrs/week, 52 weeks/year) Other Expenses = $1,500,000/Year Color of the device: Green Workstation Processing Time 7 minutes 1 10 minutes 4 minutes 4 5 minutes 1 minute An Engineer proposes buying a new fixture to reduce total processing time by 4 minutes. The new fixture, which will cost $1,000, would allow some work to be transferred from workstation 100 to 200. Assume 2 minutes of work will be transferred from 1 to 2 and processing time of 1 will go down to 5 minutes, processing time of 4 will go down to 3 minutes and processing time of 2 will go up to 12 minutes. Would you approve this change? Explain Why? State your assumptions and show your math. 2. 3.
Consider the following simplified production process for an electronic device. Demand = 50,000 devices/Year Price = $50 each Raw Material = $5/device Employee Wage = $25/hr Number of Employees = 5 (1/workstation) Each Employee Works 2,080 hrs/year (40 hrs/week, 52 weeks/year) Other Expenses = $1,500,000/Year Color of the device: Green Workstation Processing Time 7 minutes 1 10 minutes 4 minutes 4 5 minutes 1 minute An Engineer proposes buying a new fixture to reduce total processing time by 4 minutes. The new fixture, which will cost $1,000, would allow some work to be transferred from workstation 100 to 200. Assume 2 minutes of work will be transferred from 1 to 2 and processing time of 1 will go down to 5 minutes, processing time of 4 will go down to 3 minutes and processing time of 2 will go up to 12 minutes. Would you approve this change? Explain Why? State your assumptions and show your math. 2. 3.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Consider the following simplified production process
for an electronic device.
Demand = 50,000 devices/Year
Price = $50 each
Raw Material = $5/device
Employee Wage = $25/hr
Number of Employees = 5 (1/workstation)
Each Employee Works 2,080 hrs/year (40 hrs/week,
52 weeks/year)
Other Expenses = $1,500,000/Year
Color of the device: Green
Workstation
Processing Time
7 minutes
1
10 minutes
3
4 minutes
5 minutes
1 minute
An Engineer proposes buying a new fixture to
reduce total processing time by 4 minutes. The new
fixture, which will cost $1,000, would allow some
work to be transferred from workstation 100 to 200.
Assume 2 minutes of work will be transferred from 1
to 2 and processing time of 1 will go down to 5
minutes, processing time of 4 will go down to 3
minutes and processing time of 2 will go up to 12
minutes. Would you approve this change? Explain
Why? State your assumptions and show your math.
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