Total annual operating costs between the two alternatives

Assignment Help Operation Management

Reference no: EM131279541

In our enterprise we operate a mixing tank that is 18 years of age. Maintenance records for the last 12 months show that parts and labor expenses, including overtime premiums, required to repair this unit amounted to $43,960. Fortunately, the repairs were made during non-operating hours and downtime was not experienced.

Downtime has a cost of $6,000 per hour.

Our current operating schedule is 6 days per week, two shifts, 8 hours per shift, 50 weeks per year.

The existing tank requires a crew of 3 operators being paid wages of $15.60 per hour, plus an additional 37% for benefits.

A new blending tank assembly has a purchase price of $587,000. Installation labor is estimated to be an additional $50,500. The new equipment has an economic (Accounting) life of 10 years (divide purchase price plus installation by 10).

The replacement unit can be operated by 2 workers versus 3 for the existing unit.

Energy costs for the replacement unit will be approximately $130 per day less than the existing unit.

Calculate the cost per year to operate the existing mixing tank and the cost per year to operate the proposed new tank.

What is the difference in total annual operating costs between the two alternatives?

What decision would you make? Keep old tank or purchase a new tank?

Reference no: EM131279541

Questions Cloud

What are the two primary types of reserves : What are the two primary types of reserves?- What is stop-loss insurance?- Describe how a stop-loss insurance analysis is conducted.

Determine the net tension in the bolts : Water flows through the pipe shown in Fig. P8.91. Determine the net tension in the bolts if minor losses are neglected and the wheels on which the pipe rests are frictionless.

What are the two components of interest rate risk : What are the two components of interest rate risk?- Why do zero-coupon bonds that match the holding period eliminate interest rate risk?

List three ways person can best become biologically literate : List 3 ways a person can best become biologically literate. According to the characteristics of life discussed in the course, a rock is not considered life. Choose one characteristic of life to defend why a rock is not life.

Total annual operating costs between the two alternatives : In our enterprise we operate a mixing tank that is 18 years of age. Maintenance records for the last 12 months show that parts and labor expenses, including overtime premiums, required to repair this unit amounted to $43,960. What is the difference i..

Determine the flowrate if head losses are negligible : The turbine shown in Fig. P8.89 develops 400 kW. Determine the flowrate if (a) head losses are negligible or (b) head loss due to friction in the pipe is considered. Assume ƒ = 0.02.

Discussion of the alternative production opportunities : A discussion of exactly what costs are associated with profit maximization. A discussion of the concept of "opportunity cost." A discussion of the alternative production opportunities. A discussion of the various constraints which firms face in ma..

What is the difference between direct and indirect claims : What is the difference between direct and indirect claims?- How did derivatives begin?- What is a natural hedge? Give some examples of natural hedges.

Growth of real gdp in an economy : What can you say about the growth of the money supply and the growth of real GDP in an economy that is experiencing deflation? Apply the quantity theory of money to answer the question.

User Account

All Pages