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A manufacturing company currently purchases the metal parts which are required in the manufacture of product X. Now there is a proposal that the company
A manufacturing company currently purchases the metal parts which are required in the manufacture of product X. Now there is a proposal that the company make these parts. Two machines will be required for the operation. Machine 'A' will cost Rs. 18,00,000 and has a life of 6 years with a salvage value of Rs.2,00,000. Machine 'B' will cost Rs. 12,00,000 and has a life of 4 years with a salvage value of Rs.50,000. Machine 'A' will require an overhead after 3 years costing Rs.3,00,000. The annual operating cost of Machine 'A' is expected to be Rs.6,00,000 per year and for Machine 'B' Rs.5,00,000 per year. A total of four labourers will be required for the two machines at a cost of Rs.250 per hour per worker. In a normal 8 hour day period, the machines can produce parts sufficient to manufacture 1,00,000 products. Use a MARR of 15% per year and a purchase price of Rs.50 per product if the parts are not manufactured. Determine: D) How many of product X must be manufactured each year to justify the purchase of the machines? ii) If the company expects to produce 75,000 of product X per year, what maximum explenditure could be justified for the more expensive machining assuming its salvage value and all other costs will be same as stated
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