Question

A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows:

Machine	Cost
A	$	60,000
B	$	50,000
C	$	60,000

Product forecasts and processing times on the machines are as follows:

			PROCCESSING TIME PER UNIT (minutes)
Product	Annual Demand		A	B	C
1	15,000		2	4	2
2	25,000		6	2	3
3	15,000		3	5	5
4	20,000		3	4	2

a. Assume that only purchasing costs are being considered. Compute the total processing time required for each machine type to meet demand, how many of each machine type would be needed, and the resulting total purchasing cost for each machine type. The machines will operate 8 hours a day, 220 days a year. (Enter total processing times as whole numbers. Round up machine quantities to the next higher whole number. Compute total purchasing costs using these rounded machine quantities. Enter the resulting total purchasing cost as a whole number. Omit the "$" sign.)

Total processing time in minutes per machine:
A
B
C

Number of each machine needed and total purchasing cost
A		$
B		$
C		$

b. Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $14 each, B machines have an hourly operating cost of $12 each, and C machines have an hourly operating cost of $14 each. What would be the total cost associated with each machine option, including both the initial purchasing cost and the annual operating cost incurred to satisfy demand?(Use rounded machine quantities from Part a. Do not round any other intermediate calculations. Round your final answers to the nearest whole number. Omit the "$" sign.)

Total cost for each machine
A
B
C

Answer 1

Product		1	2	3	4	Total minutes
Annual demand		15,000	25,000	15,000	20,000
Processing time per unit	A	2	6	3	3	285,000
	B	4	2	5	4	265,000
	C	2	3	5	2	220,000
Machine	Required minutes	Avl. minutes for one machine	No. of machines	Purchasing Cost	Operating cost	Total cost
A	285,000	105,600	3	$180,000	$66,500	$246,500
B	265,000	105,600	3	$150,000	$53,000	$203,000
C	220,000	105,600	3	$180,000	$51,333	$231,333

A D E F G 1 Product 1 2 2. 3 4. Total minutes Annual demand 15000 25000 3 15000 20000 -SUMPRODUCT($D$3:$G$3,D4:G4) -SUMPRODUCT($D$3:$G$3,D5:G5) -SUMPRODUCT($D$3:$G$3,D6:G6) 4 Processin A 2 6 3 5 g time 4 2 5 4 6 C 2 5 2 per unit 7 Required Avl. minutes for Purchasing Operating Machine No, of machines Total cost minutes one machine Cost cost 8 -8*220*60 ROUNDUP(C9/D9,0) =ROUNDUP(C10/D10,0) E10*50000 C10*12/60 F10+G10 -ROUNDUP(C11/D11,0) E11*60000 -C11*14/60 =F11+G11 -C9*14/60 -E9*60000 A H4 =F9+G9 -8*220*60 10 H5 =8*220*60 11 C =H6 et LO LO CT

(a)

Total processing time in minutes per machine:
A	285,000
B	265,000
C	220,000
Number of each machine needed and total purchasing cost
A	3	$180,000
B	3	$150,000
C	3	$180,000

(b)

Total cost for each machine
A	$246,500
B	$203,000
C	$231,333