Question

A company must decide which type of machine to buy, and how many units of that type, given the following information: Type Machine Cost $9.000 $ 11,000 Product Annual Demand Processing Time per minutes per unit Machine 1 Machin 2 1 10,000 12,000 14,000 6 8 5o 7 3 a) Evaluate the proposed machines based on the annual capacity cushion of each type to handle the given demand if the machines will operate 8 hours a day, 260 days a year. b) If purchasing and operating costs are considered, which type of machine would minimize total costs, given your answer for part a? Operating costs are $10/hr for type I and $8/hr for tyne IL

Answer 1

	Standard time for a machine to operate is	124,800
		Machine 1				Machine 2
		Hours	Time	Total time		Time	Total time
	1	10000	4	40,000		6	60,000
	2	12000	6	72,000		8	96,000
	3	14000	5	70,000		7	98,000
				182,000			254,000
	Number of machine required			1.46			2
	Since purchase of machine can be partial, roundinh machine 1			2.00
	Total cost per machine			9,000			11,000
	Total cost of machine if purchased			18,000.00			22,387.82
Answer 1	Since the cost of Machine 1 is less than Machine 2, company can decide to buy Machine 1
	Operating cost	Machine 1	Machine 2
	Hourly rate	10	8
	Total time in Hours	3,033.33	4,233.33
	Total cost	30,333.33	33,866.67
Answer 2	Given that Machine 1 purchase cost is lesser than operating cost of Machine 1 and 2 both
	the company should consider purchasing Machine 1.