Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 12, Problem 14P
To determine
Calculate the additional annual cost.
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Barbour Electric is considering the introduction of a new product. This product can be produced in one of
several ways:
(a) using the present assembly line at a cost of $20 per unit,
(b) using the current assembly
line after it has been overhauled (at a cost of $5,000) with a cost of $18 per unit; and
(c) on an entirely new assembly line (costing $30,000) designed especially for the new product with a per unit cost of $15.
Barbour is worried, however, about the impact of competition. If no competition occurs, they expect to sell 10,000
units the first year. With competition, the number of units sold is expected to drop to 6,000. At the moment,
their best estimate is that there is a 40% chance of competition. They have decided to make their decision
based on the first-year sales.
(a) Develop a decision table showing the payoffs.
(b) What decision should they make? Hint: develop an EOL table and make a decision based on this table.
Estimated sales of a product is 30000 units. Two kinds of raw materials P and Q are required for manufacturing the product. Each unit of the product requires 2
units of P and 4 units of Q. The estimated cost of the P and Q OMR 2 and OMR 3 respectively.
The estimated opening balance in the beginning of the next year: finished goods: 4000 units; P: 6000 units; Q: 10000 units.
The desirable closing balance at the end of the next year: finished product: 6000 units: P: 10000 units: Q: 12000 units.
Which of the following shows the total cost of raw materials (OMR) to be purchased in Material Purchase Budget.
Select one:
O a. P = 162000 and Q = 181000
O b. P= 136000 and Q= 390000
O c.P = 124000 and Q =324000
O d. P = 134000 and Q = 334000
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A manufacturing company is considering a capacity expansion investment at the cost of $241,797 with no salvage value. The expansion would enable the company to produce up to 27,876 parts per year and the useful life of the additional capacity is seven years. Each part would generate $3.65 net profit and annual operating
and maintenance costs are estimated at $28,137 per year. The market demand for the parts is unlimited, all parts produced will be sold. The MARR of the firm is 10%.
The minimum annual production rate to make this investment justifiable is:
Enter your answer in this form: 12345.67
Chapter 12 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 7PCh. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Prob. 10PCh. 12 - Prob. 11P
Ch. 12 - Prob. 12PCh. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Prob. 23PCh. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Prob. 27PCh. 12 - Prob. 28P
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