1. Say you are a manager and proposing to purchase of $1.5 million new machine to increase of the productivity. The machine will produce 1000 more units per hour. The machine will replace five employees. The units will be of higher quality because they will be more uniform. Life spend for that machine is 10 years.

Data below shows the others cost and benefit received by your company. Based on that data, should this company invest in that new machine or nor?

1. Installation of Machine ..................... 3,125 including screens & removal of old machine
2. Increased Revenue .......................... 40,000 net value of additional 1000 units per hour, 1 shift/day,

5 days/week

3. Quality Increase Revenue ..................... 358 calculated at 75% of current reject rate
4. Reduced material costs ...................... 1,128 purchase of bulk supply reduces cost by $0.82

per hundred

5. Reduced Labor Costs ....................... 24,000 5 operators salary plus labor o/h
6. New Operator ................................. 10,000 salary plus overhead. Includes training
7. Utilities ............................................ 500 power consumption increase for a new machine
8. Insurance ......................................... 1800 premiums increase