Describe what is the profit or loss for the mahcine, Operation Management

Assignment Help:

A company is to make a decision on whether or not to purchase a machine to package its product and has asked you to review the information and provide them with answers to some questions. The machine will cost $200,000. It is desired to pay it off completely after 4 year (4 annual end of year payments). The Supplier has offered to finance the machine at 4.35%. The machine has a life span of 6 years and will have negligible salvage value. Maintenance costs are as follows: Years 1 & 2 $7,500 per year. Years 3 & 4 $10,000 per year. Years 5 & 6 $15,000 per year. Operational costs will start at $18,000 per year and increase by 2% per year (compounded). Savings from the packaging machine are estimated to be $0.40 per package with a yearly volume estimated between a high of 200,000 and a low of 150,000. Do a year-by-year analysis and answer the following questions. The Company had many other projects planned that will give a MARR of 10%.

a) Will the machine cost the company money or make the company money in the first two years assuming the high estimate of production? How much?

b) At the end of four years will the machine have made or lsot the company money? how much? (Calculate for both best and worst case scenarios).

c) What is the profit or loss for the mahcine over its lifetime assuming a best-case scenario? Assuming a worst-case scenario?

d) What is the minimum production level needed to make the purchase viable (breakeven)? To make it past the MARR?

e) If the Saving on the machine drops to $0.35 per package what happens to our numbers?

f) Based on the information available would you recommend pruchase of this machine? Explain your reasoning.


Related Discussions:- Describe what is the profit or loss for the mahcine

Expalin possible core competencies of wild west, Wild west,Inc., is a regio...

Wild west,Inc., is a regional telephone company that inherited nearly 100,000 employees and 50,000 retirees from AT&T. Wild West Inc. has a new mission: to difersify.It calls fo

Define the elements of method study and work measurement, Define the elemen...

Define the elements of method study and work measurement. Method study and Work Measurement are elements of Work Study.

Find the loss for a quality characteristic, A quality characteristic has a ...

A quality characteristic has a manufacturing specification (in cm) of 0.200 ± 0.05. Historical data indicate that if the quality characteristic takes on values larger than 0.25 cm

Comparison of market based and resource-based approach, Comparison of Marke...

Comparison of Market Based and Resource-Based Approach to Operations Strategy Since Porter's assertions, there has been a recognition that traditional strategic management has

Explain how does safety management address fatigue issues, Fatigue is a maj...

Fatigue is a major safety concern in the aviation industry. How does safety management address fatigue issues yet accomplish the job without incurring more costs in the company. We

Explain project activity including personal time, A cost estimate for a giv...

A cost estimate for a given project activity is $6,300; this cost estimate does not factor in personal time. Assuming that an allowance for personal time is 9.5%, the total estimat

Explain developing a risk matrix, How would you go about developing a risk ...

How would you go about developing a risk matrix? Give an example of the kinds of factors that should be evaluated.

Explain either party since the contract has been illegal, When a contract i...

When a contract is drawn up that becomes void due to illegality, do you believe that it involves the commission of a crime? Has a crime been committed by either party since the con

Explain changes in the environment, What changes in the environment provide...

What changes in the environment provided the opportunity for the Dewmocracy approach?

Explain making better business decision, Making Better Business Decision: D...

Making Better Business Decision: Do you provide the quizzes/exams questions for this book?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd