Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 2, Problem 38P
To determine
Whether operation 1 or 2 should be chosen.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
For the production of part R-193, two operations are being considered. The capital investment associated with each operation is identical. Operation 1 produces 2,000 parts per hour. After each hour, the tooling must be adjusted by the machine operator. This adjustment takes 20 minutes. The machine operator for Operation 1 is paid $20 per hour (this includes fringe benefits). Operation 2 produces 1,750 parts per hour, but the tooling needs to be adjusted by the operator only once every two hours. This adjustment takes 30 minutes. The machine operator for Operation 2 is paid $11 per hour (this includes fringe benefits). Assume an 8-hour workday. Further assume that all parts produced can be sold for $0.40 each. Should Operation 1 or Operation 2 be recommended?
Two alternative designs are under consideration for a tapered fastening pin. The fastening pins are sold for $0.70 each. Either design will serve equally well and will involve the same material and manufacturing cost except for the lathe and drill operations. Design A will require 12 hours of lathe time and 5 hours of drill time per 1,000 units. Design B will require 7 hours of lathe time and 8 hours of drill time per 1,000 units. The variable operating cost of the lathe, including labor, is $18.60 per hour. The variable operating cost of the drill, including labor, is $16.90 per hour. Finally, there is a sunk cost of $5,000 for Design A and $9,000 for Design B due to obsolete tooling. Solve, a. Which design should be adopted if 125,000 units are sold each year? b. What is the annual saving over the other design?
Two alternative designs are under consideration for a tapered fastening pin. The fastening pins are sold for $0.70 each. Either design will serve equally well and will involve the same material and manufacturing cost except for the lathe and drill operations. Design A will require 12 hours of lathe time and 5 hours of drill time per 1,000 units. Design B will require 7 hours of lathe time and 8 hours of drill time per 1,000 units. The variable operating cost of the lathe, including labor, is $18.60 per hour. The variable operating cost of the drill, including labor, is $16.90 per hour. Finally, there is a sunk cost of $5,000 for Design A and $9,000 for Design B due to obsolete tooling.
Which design should be adopted if 250,000 units are sold each year?
What is the annual saving over the other design?
Chapter 2 Solutions
Engineering Economy (17th Edition)
Ch. 2 - An experimental composite engine block for an...Ch. 2 - Given below is a numbered list of cost terms. For...Ch. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10P
Ch. 2 - Prob. 11PCh. 2 - Prob. 12PCh. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Suppose you are going on a long trip to your...Ch. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - A company uses a variable speed honing machine to...Ch. 2 - Prob. 31PCh. 2 - An automobile dealership offers to fill the four...Ch. 2 - Prob. 33PCh. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Prob. 36PCh. 2 - Prob. 37PCh. 2 - Prob. 38PCh. 2 - Prob. 39PCh. 2 - Prob. 40PCh. 2 - Prob. 41PCh. 2 - Prob. 42PCh. 2 - Prob. 43PCh. 2 - Prob. 44PCh. 2 - A hot water leak in one of the faucets of your...Ch. 2 - Prob. 46PCh. 2 - Prob. 47PCh. 2 - Prob. 48SECh. 2 - Prob. 49SECh. 2 - Prob. 50CSCh. 2 - Prob. 51CSCh. 2 - What is the optimal number of units that should be...Ch. 2 - Prob. 53FECh. 2 - Prob. 54FECh. 2 - Prob. 55FECh. 2 - Prob. 56FECh. 2 - Prob. 57FECh. 2 - Prob. 58FE
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- The management of First American Bank was concerned about the potential loss that might occur in the event of a physical catastrophe such as a power failure or a fire. The bank estimated that the loss from one of these incidents could be as much as $100 million, including losses due to interrupted service and customer relations. One project the bank is considering is the installation of an emergency power generator at its operations headquarters. The cost of the emergency generator is $800,000, and if it is installed, no losses from this type of incident will be incurred. However, if the generator is not installed, there is a 10% chance that a power outage will occur during the next year. If there is an outage, there is a .05 probability that the resulting losses will be very large, or approximately $80 million in lost earnings. Alternatively, it is estimated that there is a .95 probability of only slight losses of around $1 million. Using decision tree analysis, determine whether the…arrow_forwardA local restaurateur who had been running a profitable business for many years, recently purchased a three-way liquor license. This on-premise license gives the owner the legal right to sell beer, wine, and spirits in her restaurant. The cost of obtaining the three-way license was about $90,000, since only 300 such licenses are issued by the state. While the license is transferable, only $75,000 is refundable if the owner chooses not to use the license. After selling alcoholic beverages for about one year, the restaurateur came to the realization that she was losing dining customers and that her profitable restaurant was turning into a noisy, unprofitable bar. Subsequently, she spent about $8,000 placing advertisements in various newspapers and restaurant magazines across the state offering to sell the license for $80,000. After a long wait, she finally received one offer to purchase her license for $77,000. a) Would you recommend that she accept the $77,000 offer? b) The restaurateur…arrow_forwardAn internal study at Mimeo Corporation—a manufacturer of low-end photocopiers— revealed that each of its workers assembles three photocopiers per hour and is paid $6 for each assembled copier. Although the company does not have the resources needed to supervise the workers, a full-time inspector verifies the quality of each unit produced before a worker is paid for his or her output. You have been asked by your superior to evaluate a new proposal designed to cut costs. Under the plan, workers would be paid a fixed wage of $16 per hour. Would you favor the plan? Explain.arrow_forward
- Your company is contemplating bidding on an RFP (Request For Proposal) to produce 100,000 units of a specialized part. Suppose, however, that the requesting company really needs only 90,000 units of the part. Also assume that, because the part is specialized, potential suppliers do not yet possess the machines and factories needed to produce it and that overhead expenses involved in production have yet to be incurred. Suppose the average costs of all potential suppliers are as follows: Units Average Total Cost (Dollars Per Unit) 90,000 4 100,000 3 True or False: The requesting company can solicit lower bids by requesting 100,000 units as opposed to 90,000.arrow_forwardABC Company has the following information: Variable Cost per Unit is P 15; Fixed Expenses is P54,000; and Selling Price per Unit is P20. What should be the selling price per unit if break-even point is brought down to 6,000 units? ABC Company has the following information: Variable Cost per Unit is P 15; Fixed Expenses is P54,000; and Selling Price per Unit is P20. If the company will only sell 10,000 units for the month, how much profit or loss will they get?arrow_forwardProduct X is sold for $500 per unit. The total cost of production per year, including capital recovery and a return, is given by the expression TC = 0.04n3 − 700n + 50, 000 where n is the number of units sold. If TC represents the total of all fixed and variable costs, determine the following: a. The value of n that maximizes profit. b. The maximum profit for a year. c. The fixed cost per year.arrow_forward
- A provincial park issues three different types of passes to its customers (bronze, silver, and gold tickets). Each pass type allows visitors to spend different times in the park and have access to different park amenities. The profit margins of the three pass types are $1.00, $3.50, and $12.00 per pass, respectively. The administrative working units required for the three pass types are estimated to be 1, 1, and 4 units, respectively. The monthly administrative working units available are 25000 units. In a typical summer month, the number of visitors was estimated to be 10,000 visitors. Accordingly, the park management decided to issue a total of 10,000 tickets for that month. Based on preliminary market research, the park management also decided to make at least 1500 bronze and 1500 silver passes available for customers. Based on this information, what is the optimal number of each pass type that the park should issue to maximize its profit? Use the simplex method to develop your…arrow_forwardWA waste disposal company is considering getting into bio-disposal business. The incinerators cost $3750 per unit. Each unit can safely burn 2.25 tons of waste per burn and can be used for 4 burns per 8-hour day. Each unit requires 1 worker to operate the unit. Assume a labor rate of $10.25 per hour. In addition, each burn requires $104 of fuel to operate. The overhead is estimated to run $30.00 per day. The company estimates it has sufficient demand to operate 5 units of the incinerators. Each ton of waste incinerated generates $82.00 of revenue. a) What is the contribution margin to the fixed cost generated per day? Round your answer to 2 decimal places. b) How many days will it take for the company to start making a profit from the incinerators? Round your answer to 2 decimal places. c) If the company wishes to make profit after 54 days what should be the price per ton? Round your answer to 2 decimal places.arrow_forwardA plant has sufficient capacity to manufacture any combination of four different products (A, B, C, D). For each product, time is required to be invested in four different machines, which is expressed in hours per kilogram of product, as shown in the following table as shown in the following table: (attached image) Each machine has an availability of 60 hours per week. Products A, B, C and D can be sold at $9, $7, $6 and $5per kilo, respectively. Variable labor costs are $2 per hour for machines 1 and 2, and $3 per hour for machines 3 and 4. The material costs for each kilogram of product A are $4. The material costs for each kilogram of products B, C, D and D are $4 each kilogram of products B, C and D are $1. What needs to be done:Formulate a profit-maximizing PL model given the maximum demand per product shown in the table (there are 16 variables). Note: Do it by hand, no computerarrow_forward
- National Chemical Company manufactures a chemical compound that is sold for $58 per gallon. A new variant of the chemical has been discovered, and if the basic compound were processed into the new variant, the selling price would be $90 per gallon. National expects the market for the new compound variant to be 8,500 gallons initially and determines that processing costs to refine the basic compound into the new variant would be $170,000.arrow_forwardExamine the sensitivity of the project to changes in the manufacturing throughput, discount rate and gross marginarrow_forwardTwo alternatives are being considered by a food processor for the warehousing and distribution of its canned products in a sales region. These canned products come in standard cartons of 24 cans per carton. The two alternatives are as follows.Alternative A: To have its own distribution system. The administrative costs are estimated at $43,000 per year, and other general operating expenses are calculated at $0.009 per carton. A warehouse will have to be purchased, at a cost of $300,000. Alternative B: To sign an agreement with an independent distribution company that is asking a payment of $0.10 per carton distributed. Assume a study period of 10 years and that the warehouse can be sold at the end of this period for $200,000. a. Which alternative should be chosen, if management expects that the number of cartons to be distributed will be 600,000 per year? b. Find the minimum number of cartons per year that will make the alternative of having a distribution system (Alt. A) more…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning