Problem 5 11a: Manager Must Decide Which Type Of Machine To

Problem 5 11a Manager Must Decide Which Type Of Machine To Buy A B

A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows: Machine Cost A $ 60,000 B $ 50,000 C $ 60,000 Product forecasts and processing times on the machines are as follows: PROCCESSING TIME PER UNIT (minutes) Product Annual Demand A B C 1 8,,,,

a. Assume that only purchasing costs are being considered. Compute the total processing time required for each machine type to meet demand, how many of each machine type would be needed, and the resulting total purchasing cost for each machine type. The machines will operate 10 hours a day, 250 days a year. (Enter total processing times as whole numbers. Round up machine quantities to the next higher whole number. Compute total purchasing costs using these rounded machine quantities. Enter the resulting total purchasing cost as a whole number. Omit the "$" sign.) Total processing time in minutes per machine: A [removed] B [removed] C [removed] Number of each machine needed and total purchasing cost A [removed] $ [removed] B [removed] $ [removed] C [removed] $ [removed]

b. Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $11 each, B machines have an hourly operating cost of $12 each, and C machines have an hourly operating cost of $10 each. What would be the total cost associated with each machine option, including both the initial purchasing cost and the annual operating cost incurred to satisfy demand? (Use rounded machine quantities from Part a. Do not round any other intermediate calculations. Round your final answers to the nearest whole number. Omit the "$" sign.) Total cost for each machine A [removed] B [removed] C [removed]

Paper For Above instruction

The decision of selecting an appropriate manufacturing machine involves an extensive cost analysis, encompassing both initial purchase expenses and ongoing operational costs. This paper evaluates three machine types—A, B, and C—considering their purchase costs, processing capabilities, and operational expenses to guide managerial decision-making for optimal cost efficiency and capacity utilization.

Introduction

Manufacturing firms often need to select machinery that aligns with production demand while optimizing costs. The initial investment can significantly impact budget allocations, while operational costs influence ongoing expenses. A thorough analysis considering these factors supports a strategic approach to machinery acquisition, ensuring capacity meets demand without unnecessary expenditure.

Initial Purchase Cost Analysis

The first step involves determining the total processing time required annually for each machine type to meet demand. The processing time per unit and annual demand per product are necessary inputs. While specific demand quantities are not provided explicitly, they are essential for calculating total processing times.

Assuming the missing data values—such as demand and process times—are known, the total processing time per product is calculated by multiplying the demand by processing time per unit. Summing these across all products provides total processing time per machine type.

Next, we convert total processing times into machine quantities required, considering their operational hours. Since machines operate 10 hours daily over 250 days, total annual operational minutes per machine are 10 hours/day 250 days 60 minutes/hour = 150,000 minutes.

Dividing total processing time by the annual operational minutes per machine and rounding up yields the number of machines needed for each type. This process ensures capacity sufficiency.

Once the number of machines per type is established, total purchase costs are calculated by multiplying the number of machines by the individual machine cost.

Operational Cost and Total Cost Calculation

Beyond initial purchase costs, each machine incurs operational costs based on hourly costs and operational hours. For each machine type, the hourly operating cost is multiplied by the number of operational hours per day and days per year to obtain annual operating expenses.

The total annual cost for each machine type combines the initial purchase cost and the annual operating cost. Calculating these costs provides a comprehensive view of the financial commitment associated with each option.

Discussion

The analysis demonstrates that although machines like B may have lower purchase costs, their operational expenses might offset initial savings, affecting total cost-effectiveness. Conversely, machines with higher purchase costs but lower operational costs, such as C, might present more economical options over the long term.

Strategic decisions should thus balance upfront costs with ongoing expenses, considering operational capacity, demand, and budget constraints.

Conclusion

Selecting the optimal machinery involves evaluating both purchase and operational costs. Managers should consider the total cost over the machinery’s lifecycle rather than just the upfront expenditure. Based on the calculations, the most cost-effective option can be identified, ensuring production capacity aligns with demand while maintaining financial efficiency.

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