Question

A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows:

Machine	Cost
A	$	40,000
B	$	30,000
C	$	80,000

Product forecasts and processing times on the machines are as follows:

			PROCCESSING TIME PER UNIT (minutes)
Product	Annual Demand		A	B	C
1	10,000		3	1	1
2	11,000		5	5	4
3	9,000		5	2	4
4	13,000		1	3	5

a. Assume that only purchasing costs are being considered. Compute the total processing time required for each machine type to meet demand, how many of each machine type would be needed, and the resulting total purchasing cost for each machine type. The machines will operate 8 hours a day, 230 days a year. (Enter total processing times as whole numbers. Round up machine quantities to the next higher whole number. Compute total purchasing costs using these rounded machine quantities. Enter the resulting total purchasing cost as a whole number. Omit the "$" sign.)

Total processing time in minutes per machine:
A
B
C

Number of each machine needed and total purchasing cost
A		$
B		$
C		$

b. Consider this additional information: 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 $14 each, and C machines have an hourly operating cost of $11 each. What would be the total cost associated with each machine option, including both the initial purchasing cost and the annual operating cost incurred to satisfy demand?(Use rounded machine quantities from Part a. Do not round any other intermediate calculations. Round your final answers to the nearest whole number. Omit the "$" sign.)

Total cost for each machine
A
B
C

Answer 1

Answer a (i)

Machine	Cost ($)
A	40,000
B	30000
C	80000
Demand for Each Product	Units	Per-unit arocessing Time for Machine A (minutes)	total time (minutes) for A= Total demand of each product*Processing time	Per-unit arocessing Time for Machine B (minutes)	total time (minutes) for B= Total demand of each product*Processing time	Per-unit arocessing Time for Machine C	total time (minutes) for C= Total demand of each product*Processing time
1	10000	3	30000	1	10000	1	10000
2	11000	5	55000	5	55000	4	44000
3	9000	5	45000	2	18000	4	36000
4	13000	1	13000	3	39000	5	65000
		Total	143000	Total	122000	Total	155000

Answer a (ii)

Machine	Total Processing time for machine (minutes)
A	143000
B	122000
C	155000

Time Available
Days	260
Hours	8
Minutes	60
TOTAL (minutes)	124800

Machine	Total Processing time for machine (minutes)	Time Available per year (in Minutes) = Days * Hours * Minutes	Number of Machines required = Roundup((Total Processing time for machine)/(Time Available per year),0)	Total Purchasing cost (Number of Machines required/Cost per machine)
A	143000	124800	2	80000
B	122000	124800	1	30000
C	155000	124800	2	160000
			Answer a (ii)	Answer a (ii)

Answer b

Machine	Total Processing time for machine (minutes)	Total Annual Processing time for machine (Hour)	Operating Cost per Hour ($)	Total Annual Operating cost $ (=Per-Hour operating cost)*(Total operating hours per annum)	Purchase cost fr machines	Total Cost for each machine = (Annual operating Cost) + (Total urchase cost)
A	143000	2383.33	10	$ 23833.33	$ 80,000	$ 103,833.33
B	122000	2033.33	14	$ 28466.67	$ 30,000	$ 58,466.67
C	155000	2583.33	11	$ 28416.67	$ 160,000	$ 188,416.67
						Answer b

Dear Student,
Please ask, if you have any doubts through the comment section. Do rate the answer.