Question

Alternative A M P, $ 23,000 8,000 S, $ 4,000 0 Life, years 10 5 M&O, $/year 3,500 1,500 Labor rate $/hr 24 12 People 1 3 Output, tons/hr 8 6

Select the best alternative if the expected production tonnage is 2500 tons

S = Salvage value

M&O = money spent per year

20 Alternative P, $ S, $ Life, years M&O, $/year Labor rate $/br People Output, tons/br 23,0008,000 4,000 10 0 3,500 1,500 24 12 6 Select the best alternative if the expected production tonnage is 2500 ton

Answer 1

From the given alternatives, it can be understood that one of the alternative products is a high-end product with quality and the other product is an average product. The choice therefore would be been a very good product and a good product. Here, we need to understand our requirement from the product.

Given is that, we need to produce 2500 tons of output every year, therefore, it can be seen that Product B (Alterative B is more suitable for us ) as it can produce 6 tons of the product per hour and our demand would be met in a total of about 615 hours. Alternative A would have been more suitable if our need for production would have been much higher. But since our production requirement is only 2500 tons, Alternative B should be more preferable choice.