APSco, a large electronics subcontractor for the Air Force, needs to immediately acquire 10 soldering machines with specially prepared jigs for assembling components onto circuit boards. More machines may be needed in the future. The lead production engineer has outlined two simplified, but viable, alternatives. The company’s MARR is 15% per year and capitalized cost is the evaluation technique.Alternative LT (long-term). For $8 million now, a contractor will providethe necessary number of machines (up to a maximum of 20), now andin the future, for as long as APSco needs them. The annual contract feeis a total of $25,000 with no additional per-machine annual cost. Thereis no time limit placed on the contract, and the costs do not escalate.Alternative ST (short-term). APSco buys its own machines for $275,000each and expends an estimated $12,000 per machine in annualoperating cost (AOC). The useful life of a soldering system is 5 years.
APSco, a large electronics subcontractor for the Air Force, needs to immediately acquire 10 soldering machines with specially prepared jigs for assembling components onto circuit boards. More machines may be needed in the future. The lead production engineer has outlined two simplified, but viable, alternatives. The company’s MARR is 15% per year and capitalized cost is the evaluation technique.
Alternative LT (long-term). For $8 million now, a contractor will provide
the necessary number of machines (up to a maximum of 20), now and
in the future, for as long as APSco needs them. The annual contract fee
is a total of $25,000 with no additional per-machine annual cost. There
is no time limit placed on the contract, and the costs do not escalate.
Alternative ST (short-term). APSco buys its own machines for $275,000
each and expends an estimated $12,000 per machine in annual
operating cost (AOC). The useful life of a soldering system is 5 years.
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