Question
Three models of baseball bats will be manufactured in a new plant in Pulaski. Each bat requires some manufacturing time at either Lathe 1 or
Three models of baseball bats will be manufactured in a new plant in Pulaski. Each bat requires some manufacturing time at either Lathe 1 or Lathe 2, according to the following table. Your task is to help decide which type of lathe to install. Show and explain all work to support your recommendation
Machining Hours for the Production of Baseball Bats | ||
Product | Lathe 1 (L1) | Lathe 2 (L2) |
Wood bat | 1,600 hr | 950 hr |
Aluminum bat | 1,800 hr | 1,100 hr |
Kevlar bat | 2,750 hr | 2,350 hr |
Total machining hours | 6,150 hr | 4,400 hr |
The plant will operate 3,000 hours per year. Machine availability is85% for Lathe 1 and 90% for Lathe2. Scrap rates for the two lathes are5% versus 10% for L1 and L2 respectively. Cash flows and expected lives for the two lathes are given in the table below. Annual operating expenses are based on an assumed operation of 3,000 hours per year, and workers are paid during any idle time of L1 and L2. Upper management has decided that MARR 18% per year.
Cash Flows and Expected Lives for L1 and L2 | ||
Lathe 1 (L1) | Lathe 2 (L2) | |
Capital investment | $18,000 per lathe | $25,000 per lathe |
Expected life | 7 years | 11 years |
Annual expenses | $5,000 per lathe | $9,500 per lathe |
How many type LI lathes will be required to meet the machine-hour requirement?
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