The Ecology Group wishes to purchase a piece of equipment for recycling of various metals. Machine 1 costs $123,000, has a life of 10 years, an annual cost of $5000, and requires one operator at a cost of $24 per hour. It can process 10 tons per hour. Machine 2 costs $70,000, has a life of 6 years, an annual cost of $2500, and requires two operators at a cost of $24 per hour each to process 6 tons per hour. Assume i = 7% per year and 2080 hours per work year. Determine the annual breakeven tonnage of scrap metal at i = 7% per year and select the better machine for a processing level of 1500 tons per year.
The Ecology Group wishes to purchase a piece of equipment for recycling of various metals. Machine 1 costs $123,000, has a life of 10 years, an annual cost of $5000, and requires one operator at a cost of $24 per hour. It can process 10 tons per hour. Machine 2 costs $70,000, has a life of 6 years, an annual cost of $2500, and requires two operators at a cost of $24 per hour each to process 6 tons per hour. Assume i = 7% per year and 2080 hours per work year. Determine the annual breakeven tonnage of scrap metal at i = 7% per year and select the better machine for a processing level of 1500 tons per year.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The Ecology Group wishes to purchase a piece of
equipment for recycling of various metals. Machine
1 costs $123,000, has a life of 10 years, an
annual cost of $5000, and requires one operator at
a cost of $24 per hour. It can process 10 tons per
hour. Machine 2 costs $70,000, has a life of 6
years, an annual cost of $2500, and requires two
operators at a cost of $24 per hour each to process
6 tons per hour. Assume i = 7% per year and 2080
hours per work year. Determine the annual breakeven
tonnage of scrap metal at i = 7% per year and
select the better machine for a processing level of
1500 tons per year.
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