Question

A firm has decided to manufacture biodegradable golf tees. These are two production processes available for consideration.

Assuming material and direct labor costs are the only variable costs and the

MARRequals=1313 %

per year, over what range of annual production volume is Process A preferred. Assume repeatability.

& Problem 6-33 (algorithmic) Question Help A firm has decided to manufacture biodegradable golf tees. These are two production processes available for consideration. Assuming mater al and direct labor costs are the only variable costs and the ARR 13% er year over what rai g e of annual production o ume s Process A refere repeatability Assume EB Click the icon to view the pertinent data for each process Click the icon to view the interest and annuity table for discrete compounding when the MARR is 13% per year. Process A is preferred if the annual production volume is '| | tees/year. (Round to the nearest w hole number.) More Info Investment Operation and Maintenance Costs Material and Direct Labor Costs Salvage Value Useful Life Process A $23,000 $16,000 $0.14 $20,000 15 years ProcessB $16,000 $13,000 $0.19 $20,000 6 years Print Done Discrete Compounding: 1-13% Single Payment Uniform Series Uniform Gradient Compound Present Compound Amount Factor To Find F Given A Capital Recovery Factor To Find A Given P Uniform Series Worth Factor Factor Gradient Present Amount Factor To Find F Given P Present Worth Factor To Find P Given A Fund Factor To Find A Given F 0 To Find P Given F To Find P Given G To Find A Given G A/G 0.0000 0.4695 0.8850 0.0000 0.7831 1.1300 1.2769 1.4429 1.6305 1.8424 2.0820 2.3526 2.6584 0.8850 1.1300 0.5995 0.4235 0.3362 0.2843 0.2502 0.2261 0.2084 0.1949 0.1843 0.1758 0.1690 2.1300 3.4069 4.8498 6.4803 8.3227 10.4047 12.7573 0.4695 0.2935 0.2062 0.1543 0.1202 0.6931 0.6133 0.5428 0.4803 0.4251 0.3762 0.3329 0.2946 0.2607 0.2307 0.2042 0.1807 0.1599 2.3612 4.0092 6.1802 8.5818 11.1322 13.7653 16.4284 19.0797 21.6867 24.2244 26.6744 29.0232 4 3.5172 3.9975 4.4226 4.7988 1.7571 2.1468 0.0784 0.0649 0.0543 0.0458 0.0390 0.0334 0.0287 0.0247 2.8685 3.3946 3.8359 4.3345 4.8980 5.5348 6.2543 5.4262 5.6869 5.9176 3.5162 3.8134 4.0936 4.3573 4.6050 4.8375 12 13 25.6502 29.9847 6.3025 6.4624 Print Done

Answer 1

MARR = 13%

Let volume of trees be T,

Process A

EUAC of process A = 23000*(A/P,13%,15) + 16000 + 0.14*T - 20000*(A/F,13%,15)

= 23000*0.154741 + 16000 + 0.14*T - 20000*0.024741

= 19063.51 + 0.14*T

EUAC of process B = 16000*(A/P,13%,6) + 13000 + 0.19*T - 20000*(A/F,13%,6)

= 16000*0.250153 + 13000 + 0.19*T - 20000*0.120153

= 14599.388 + 0.19*T

Equating EUAC of process A = EUAC of process B

19063.51 + 0.14*T = 14599.388 + 0.19*T

0.19T - 0.14T = 19063.51 - 14599.388

0.05T = 4464.122

T = 89282.44

Process A is preferred if annual production volume is more than 89282 trees / yr