Answered step by step
Verified Expert Solution
Question
1 Approved Answer
If you expect to manufacture 1,000,000 units each year for the next 3 years, which machine would you purchase and why? Please show the math
If you expect to manufacture 1,000,000 units each year for the next 3 years, which machine would you purchase and why? Please show the math supporting your answer, including the total cost to run each machine for 3 years. Note: For this problem, you do not need to worry about NPV (assume the discount rate = 0%).
Your company has to decide which of four machines to purchase for a new production line you will be starting up. The one-time machine purchase price and installation cost, as well as the operating cost per unit manufactured, and the expected number of hours of downtime (requiring maintenance) for each machine are shown in the table below. Downtime costs $10,000 per hour (which includes repair and other costs). Machine Machine Operating Machine Installation Cost per Unit Purchase Price Cost Manufactured Machine A: $ 800,000 $ 100,000 $ 0.65 Machine B: $ 1,000,000 $ 200,000 $ 0.50 Machine C: $ 500,000 $ 300,000 $ 0.70 Machine D: $ 1,100,000 $ 200,000 $ 0.40 Expected Number of Hours of Downtime per year 60 80 50 85 Your company has to decide which of four machines to purchase for a new production line you will be starting up. The one-time machine purchase price and installation cost, as well as the operating cost per unit manufactured, and the expected number of hours of downtime (requiring maintenance) for each machine are shown in the table below. Downtime costs $10,000 per hour (which includes repair and other costs). Machine Machine Operating Machine Installation Cost per Unit Purchase Price Cost Manufactured Machine A: $ 800,000 $ 100,000 $ 0.65 Machine B: $ 1,000,000 $ 200,000 $ 0.50 Machine C: $ 500,000 $ 300,000 $ 0.70 Machine D: $ 1,100,000 $ 200,000 $ 0.40 Expected Number of Hours of Downtime per year 60 80 50 85Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started