ESSENTIALS OF ECONOMICS
ESSENTIALS OF ECONOMICS
11th Edition
ISBN: 9781260225334
Author: SCHILLER
Publisher: RENT MCG
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Chapter 5, Problem 9QFD
To determine

The number of electric cars that will be produced in factory.

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"I know that it's the thing to do," insisted Pamela Kincaid, vice president of finance for Colgate Manufacturing. "If we are going to be competitive, we need to build this completely automated plant." "I'm not so sure," replied Bill Thomas, CEO of Colgate. "The savings from labor reductions and increased productivity are only $4 million per year. The price tag for this factory-and it's a small one-is $45 million. That gives a payback period of more than 11 years. That's a long time to put the company's money at risk." "Yeah, but you're overlooking the savings that we'll get from the increase in quality," interjected John Simpson, production manager. "With this system, we can decrease our waste and our rework time significantly. Those savings are worth another million dollars per year." "Another million will only cut the payback to about 9 years," retorted Bill. "Ron, you're the marketing manager-do you have any insights?" "Well, there are other factors to consider, such as service…
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