For the production of part R-193, two operations are being considered. The capital investment associated witheach operation is identical.Operation 1 produces 2,100 parts per hour. After each hour, the tooling must be adjusted by the machineoperator. This adjustment takes 15 minutes. The machine operator for Operation 1 is paid $24 per hour (thisincludes fringe benefits).Operation 2 produces 2,350 parts per hour, but the tooling needs to be adjusted by the operator only onceevery two hours. This adjustment takes 45 minutes. The machine operator for Operation 2 is paid $13 perhour (this includes fringe benefits).Assume an 8-hour workday. Further assume that all parts produced can be sold for $0.35 each.a. Should Operation 1 or Operation 2 be recommended?b. What is the basic tradeoff in this problem?

Answered: For the production of part R-193, two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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For the production of part R-193, two operations are being considered. The capital investment associated with
each operation is identical.
Operation 1 produces 2,100 parts per hour. After each hour, the tooling must be adjusted by the machine
operator. This adjustment takes 15 minutes. The machine operator for Operation 1 is paid $24 per hour (this
includes fringe benefits).
Operation 2 produces 2,350 parts per hour, but the tooling needs to be adjusted by the operator only once
every two hours. This adjustment takes 45 minutes. The machine operator for Operation 2 is paid $13 per
hour (this includes fringe benefits).
Assume an 8-hour workday. Further assume that all parts produced can be sold for $0.35 each.
a. Should Operation 1 or Operation 2 be recommended?
b. What is the basic tradeoff in this problem?

Expert Solution

Step 1

Trade off is defined as the situation where decision is made involving diminishing a quality, quantity. Tradeoff is a situation where increasing one commodity and decreasing another. Trade off is also a term similar to to the concept of opportunity cost. For example, an individual can take a day off from work for attending a concert, where he gains the opportunity of seeing the favourite band but also losing the wage he could have earned in the day.

For the operation 1:

Production per hour = 2100;

Adjustment time = 15 minutes;

Cost of machine operator per hour = $24;

Sale price of each unit= 0.35

For the operation 2:

Production per hour = 2350;

Adjustment time = 45 minutes;

Cost of machine operator per hour = $13;

Sale price of each unit= 0.35

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