Question
Mighty Metals products metal fabricated parts used on ships. One of these parts, part number 672, is produced on CNC machines and Mighty Metals has
Mighty Metals products metal fabricated parts used on ships. One of these parts, part number 672, is produced on CNC machines and Mighty Metals has 14 CNC machines that can be used to make part number 672. Suppose part number 672 requires 8 minutes of machining time, 3 minutes of operator time to load and set the machine, and 2 minutes of operator time to unload and clean out the machine. There is a stable demand for part number 672 of 35 per hour. The opportunity cost of one hour of time on a CNC machine is $60 per hour (not including labor). That is, saving one hour on a CNC machine is worth $60 to Mighty Metals. The labor cost to run a CNC machine is $36 per hour. What is the optimal number of machines and operators to use in order to minimize the average production cost of producing part number 672? If the opportunity cost per hour of a CNC machine was $36 and the labor cost was $60 would that change your answer? Why or why not?
Step 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