If interest on invested capital is 25%, determine the number of parts per year at which the machines are equally economical. If the expected number of parts per year is greater than this break-even quantity, which machine would be favored?
Two machines are being considered for the production of a particular part for which there is a long term-demand. Machine A cost P50,000.00 and is expected to last 3 years and have a P10,000 salvage value. Machine B costs P75,000.00 and is expected to last 6 years and have zero salvage value. Machine A can produce a part in 18 seconds; Machine B requires only 12 seconds per part. The out-of-pocket hourly cost of operation is P38.00 for A and P30.00 for B. Monthly Maintenance cost are P200.00 for A and P220.00 for B. If interest on invested capital is 25%, determine the number of parts per year at which the machines are equally economical. If the expected number of parts per year is greater than this break-even quantity, which machine would be favored?
Step by step
Solved in 2 steps
