Problem 5-10
A manager must decide which type of machine to buy, A, B, or C. Machine costs are as follows:
Machine Cost
A $ 55,594
B $ 21,418
C $ 80,927
Product forecasts and processing times on the machines are as follows:
PROCCESSING TIME PER UNIT (minutes)
Product Annual
Demand A B C
1 14,152 3 4 2
2 12,254 4 4 3
3 7,911 5 6 4
4 29,094 2 2 1
a.
Assume that only purchasing costs are being considered. Which machine would have the lowest total cost, and how many of that machine would be needed? Machines operate 10 hours a day, 250 days a year. (Round up your answers to the next whole number.)
Total processing time in minutes per machine:
A = 189,215
B = 211,278
C =125,804
Number of each machine needed and total cost
A 2 $ ???
B 2 $ ???
C 1 $ ???
Buy machines.
b.
Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $12 each, B machines have an hourly operating cost of $11 each, and C machines have an hourly operating cost of $13 each. Which alternative would be selected, and how many machines, in order to minimize total cost while satisfying capacity processing requirements? (Round your answers to the nearest whole number.)
Total cost for each machine
A ???
B ???
C ???
Buy 2 B machines.
