Is the investment in the brake justified why or why not

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Reference no: EM131407636

Assignment

A machine that produces a certain piece must be turned off by the operator after each piece is completed. The machine "coasts" for 20 seconds after it is turned offpreventing the operator from removing the piece quickly before producing the next piece. An engineer has suggested installing a brake that would reduce the coasting time to 10 seconds.

The machine produces 25,000 pieces a year. The time to produce one piece is 2 minutes 50 seconds, excluding coasting time. The operator earns $[H] an hour and other direct costs related to the operations are $[D] an hour. The brake will require servicing every [S] hours of operation. It will take the operator 20 minutes to perform the necessary maintenance and will require $[M] in parts and material. The brake is expected to last 5,000 hours of operation of the machine (with proper maintenance) and will have no salvage value.

Is the investment in the brake justified? Why or why not? If the investment is justified, how much could be spent for the brake if the Minimum Attractive Rate of Return is 10% compounded annually?

If your student ID number ends in	H	D	S	M
0, 2, 4, 6, 8	12	4	253	56
1, 3, 5, 7, 9	13	4	258	54

Hints:

1. What are the two options? How long is the total time per piece for each of the two options?

2. If you know the total time per piece and we need 25,000 pieces how long should the machine work per year for each option?

3. How much will be the annual cost for the number of hours in hint 2 for the two options?

4. In the case of the brake there are additional charges for maintenance. Based on how often it fails how many maintenances are required in a year? What is the cost for each maintenance?

5. If the brake lasts for 5,000 hours of operation how many years of operation does that equal? How can you use this information in comparing the alternatives?

Reference no: EM131407636

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