A part is being made by sand casting process. The process needs a furnace that costs $20,000 and can serve 10 years with a $1,000 salvage value at the end of its life. Its annual maintenance cost is $1,000. The rate-or-return criterion for the equipment investment is 25%. The machine overhead rate is 30%. This process can produce 5 parts/h. The labor to operate the machine is $10/h with an applicable overhead rate of 50%. The material cost is $6/part, with an overhead rate of 20%. The sale price is $ 16/part. (a) Use UAC method to formulate the total annual cost of the factory to sand cast this part as the function of the quantity of parts being made. The total cost is the sum of equipment cost, labor cost, material cost and their overheads. (b) Determine the profit break-even point. The same part can be made by die casting process. The process needs the same furnace as in Problem 1, and additionally it needs a die casting machine that cost $100,000 and can serve 8 years with a $5,000 salvage value at the end of its life. The annual maintenance cost is $8,000. The rate-of-return criterion for the die casting machine is also 25%, and the machine overhead rate is also 30%. The die casting process needs higher capital investment in equipment and more expensive labor cost, but provides high production rate and costs lower material consumption (no need for sand mold material and no additional molten material needed to fill the riser). A worker that costs $12/h will be needed for this process (to operate both the furnace and the die casting machine), with a labor cost overhead rate of 50%. The process can produce 30 parts/h. The material cost is $5/part, with an overhead rate of 20%. (a) Use UAC method to formulate the total annual cost of the factory to die cast this part as the function of the quantity of parts being made. (b) Determine the cost break-even point between the sand casting and die casting processes. If the market only needs 50,000 of this part each year, please determine which method is more profitable. A part is being made by sand casting process. The process needs a furnace that costs $20,000 and can serve 10 years with a $1,000 salvage value at the end of its life. Its annual maintenance cost is $1,000. The rate-or-return criterion for the equipment investment is 25%. The machine overhead rate is 30%. This process can produce 5 parts/h. The labor to operate the machine is $10/h with an applicable overhead rate of 50%. The material cost is $6/part, with an overhead rate of 20%. The sale price is $ 16/part. (a) Use UAC method to formulate the total annual cost of the factory to sand cast this part as the function of the quantity of parts being made. The total cost is the sum of equipment cost, labor cost, material cost and their overheads. (b) Determine the profit break-even point. The same part can be made by die casting process. The process needs the same furnace as in Problem 1, and additionally it needs a die casting machine that cost $100,000 and can serve 8 years with a $5,000 salvage value at the end of its life. The annual maintenance cost is $8,000. The rate-of-return criterion for the die casting machine is also 25%, and the machine overhead rate is also 30%. The die casting process needs higher capital investment in equipment and more expensive labor cost, but provides high production rate and costs lower material consumption (no need for sand mold material and no additional molten material needed to fill the riser). A worker that costs $12/h will be needed for this process (to operate both the furnace and the die casting machine), with a labor cost overhead rate of 50%. The process can produce 30 parts/h. The material cost is $5/part, with an overhead rate of 20%. (a) Use UAC method to formulate the total annual cost of the factory to die cast this part as the function of the quantity of parts being made. (b) Determine the cost break-even point between the sand casting and die casting processes. If the market only needs 50,000 of this part each year, please determine which method is more profitable
