Splenda specializes in the making S'mores cakes . The cost of making the S'mores is as mentioned in the table. The procedure is as follows, it bakes the crackers in an oven and once the crackers are ready they add marshmallow and chocolate chip between the crackers and bake it for a few seconds so that it sticks together. Recently Splenda has been facing a lot of problems with the oven as some of its Marshmallows are not sticking to the cracker and hence they have to scrap them. This accounts to 10% of the S'mores actually made. A vendor feels that installation of a new oven which has just been introduced in the market is the solution to this problem. He says that installation of this oven with temperature sensors that would cost $300,000 will completely reduce the loss due to the defective items. Splenda operates 40 hours a week for 48 weeks in a year. It can sell a box of S'mores for $ 15. Assuming Splenda can sell all the cakes it makes which option would you recommend to Splenda if the cost of capital for Splenda is 6%.

	cost
material cost per box	$ 1.93
labor cost (2 operators @ 15 per hour)	30.00
electricity ($/hr)	$ 1.20
packaging and shipping $/box	$2.10

Current set-up

It takes 45 minutes to make the crackers and an additional 15 minutes for the smores

8 smores in a box

Maintenance of $ 3000 is incurred per year

Number of boxes per hour is 4

New set up

It takes 25 minutes to make the crackers and an additional 15 minutes for the smores

8 smores in a box

Maintenance of $1,800 is incurred

AEW of current set up =

AEW of new setup =

which option to be selected :