For the production of part R-193, two operations are being considered. The capital investment associated with each operation is identical. Operation 1 produces 2,100 parts per hour. After each hour, the tooling must be adjusted by the machine operator. This adjustment takes 15 minutes. The machine operator for Operation 1 is paid $24 per hour (this includes fringe benefits). Operation 2 produces 2,350 parts per hour, but the tooling needs to be adjusted by the operator only once every two hours. This adjustment takes 45 minutes. The machine operator for Operation 2 is paid $13 per hour (this includes fringe benefits). Assume an 8-hour workday. Further assume that all parts produced can be sold for $0.35 each. a. Should Operation 1 or Operation 2 be recommended? b. What is the basic tradeoff in this problem?
For the production of part R-193, two operations are being considered. The capital investment associated with each operation is identical. Operation 1 produces 2,100 parts per hour. After each hour, the tooling must be adjusted by the machine operator. This adjustment takes 15 minutes. The machine operator for Operation 1 is paid $24 per hour (this includes fringe benefits). Operation 2 produces 2,350 parts per hour, but the tooling needs to be adjusted by the operator only once every two hours. This adjustment takes 45 minutes. The machine operator for Operation 2 is paid $13 per hour (this includes fringe benefits). Assume an 8-hour workday. Further assume that all parts produced can be sold for $0.35 each. a. Should Operation 1 or Operation 2 be recommended? b. What is the basic tradeoff in this problem?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 5E
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