Three methods can be used for producing heat sensors for high-temperature furnaces. Method A will have a fixed cost of $140,000 per year and a production cost of $62 per part. Method B will have a fixed cost of $210,000 per year and a production cost of $28 per part. Method C will require the purchase of equipment costing $500,000. It will have a life of five years and a 25% of first cost salvage value. The production cost will be $53 per part. At an interest rate of 10% per year, determine the breakeven annual production rate between the two lowest cost methods.
Three methods can be used for producing heat sensors for high-temperature furnaces. Method A will have a fixed cost of $140,000 per year and a production cost of $62 per part. Method B will have a fixed cost of $210,000 per year and a production cost of $28 per part. Method C will require the purchase of equipment costing $500,000. It will have a life of five years and a 25% of first cost salvage value. The production cost will be $53 per part. At an interest rate of 10% per year, determine the breakeven annual production rate between the two lowest cost methods.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 35P
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Three methods can be used for producing heat sensors for high-temperature furnaces. Method A will have a fixed cost of $140,000 per year and a production cost of $62 per part. Method B will have a fixed cost of $210,000 per year and a production cost of $28 per part. Method C will require the purchase of equipment costing $500,000. It will have a life of five years and a 25% of first cost salvage value. The production cost will be $53 per part. At an interest rate of 10% per year, determine the breakeven annual production rate between the two lowest cost methods.
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