Problem 5.A manager must decide which type of machine to buy, A, B, or C. Machine costs are asfollows:MachineCost$40,000$30,000$80,000ABProduct forecasts and processing times on the machines are as follows:PROCCESSING TIMEPER UNIT (minutes)CAnnual Demand3ProductA16,00012,0006,00030,000144436.44221The machines differ in terms of hourly operating costs: The A machines have an hourlyoperating cost of $10 each, B machines have an hourly operating cost of $11 each, and Cmachines have an hourly operating cost of $12 each. Which alternative would be selected,and how many machines, in order to minimize total cost while satisfying capacityprocessing requirements? Machines operate 10 hours a day, 250 days a year.23

Problem 5. A manager must decide which type of machine to buy, A, B, or C. Machine costs are as follows: Cost $40,000 $30,000 $80,000 Machine C Product forecasts and processing times on the machines are as follows:

Problem 5. A manager must decide which type of machine to buy, A, B, or C. Machine costs are as follows: Cost $40,000 $30,000 $80,000 Machine C Product forecasts and processing times on the machines are as follows:

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 47P: (Appendix 11A) Cycle Time, Velocity, Conversion Cost The theoretical cycle time for a product is 30...

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Question

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Problem 5.
A manager must decide which type of machine to buy, A, B, or C. Machine costs are as
follows:
Machine
Cost
$40,000
$30,000
$80,000
A
B
Product forecasts and processing times on the machines are as follows:
PROCCESSING TIME
PER UNIT (minutes)
C
Annual Demand
3
Product
A
16,000
12,000
6,000
30,000
1
4
4
4
3
6.
4
4
2
2
1
The machines differ in terms of hourly operating costs: The A machines have an hourly
operating cost of $10 each, B machines have an hourly operating cost of $11 each, and C
machines have an hourly operating cost of $12 each. Which alternative would be selected,
and how many machines, in order to minimize total cost while satisfying capacity
processing requirements? Machines operate 10 hours a day, 250 days a year.
23

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