PROBLEM 1.1
WYLIE IS OFFERED THIS AMOUNT NOW= $5,000.00
WYLIE IS WILLING TO TAKE THIS AMOUNT IN A YEAR= $5,700.00
THE INCREASE REQ'D BY WYLIE OVER ONE YEAR= $700.00
THEREFORE WYLIE'S TVOM = 14.00%
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=$5,700.00-$5,000.00
=$700.00/$5,000.00
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PROBLEM 1.2
RT LOANS= $20,000.00
RT'S TVOM= 8.00%
RT INTEREST REQ'D= $1,600.00
CYNTHIA BORROWS= $20,000.00
CYNTHIA'S TVOM= 12.00%
CYNTHIA'S EARNINGS= $2,400.00
a YES, THEY SHOULD BE ABLE TO NEGOTIATE THE LOAN
b RT REQUIRES $1,600 OR MORE IN INTERESTCYNTHIA IS WILLING TO PAY $2400 OR LESS IN INTEREST
THE ACCEPTABLE RANGE IS FROM $1,600 TO $2,400
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PROBLEM 1.3
RT LOANS= $20,000.00RT'S TVOM= 12.00%RT INTEREST REQ'D= $2,400.00 MINIMUM INTEREST REQUIRED BY RT
CYNTHIA BORROWS= $20,000.00CYNTHIA'S TVOM= 8.00%CYNTHIA'S EARNINGS= $1,600.00WILLING TO PAY= $2,000.00 MAXIMUM INTEREST CYNTHIA WILLING TO PAY
a
b RT REQUIRES $2,400 OR MORE IN INTEREST
NO, THEY SHOULD NOT BE ABLE TO NEGOTIATE THE LOAN UNLESS ONE OR BOTH CHANGE THEIR MIND
CYNTHIA CAN EARN $1,600 ON HER MONEY; HOWEVER, CYNTHIA IS WILLING TO PAY $2,000 IN INTEREST
CYNTHIA'S MONEY MUST BE INVESTED AND SHE NEEDS TO BORROW MONEY NOW, EVEN IF SHE HAS TO PAY $2,000 IN INTEREST. THERE IS STILL NO ACCEPTABLE RANGE. RT REQUIRES $2,400 OR MORE IN INTEREST; CYNTHIA WILL PAY $2,000 OR LESS. THEY ARE $400 OFF
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PROBLEM 1.4
LOAN AMOUNT= $3,000.00
YOUR TVOM= 15.00% OR $450.00 INTEREST
FRIEND'S TVOM= 20.00% OR $600.00 INTEREST
YOU ARE WILLING TO MAKE THE LOAN TO YOUR FRIEND FOR $450.00 INTEREST OR MORE. YOUR FRIEND IS WILLING TO ACCEPT THE LOAN FOR $600 INTEREST OR LESS.
SO, ANY INTEREST NEGOTIATION WITH YOU AS THE LENDER THAT IS ACCEPTABLE TO BOTH PARTIES IS BETWEEN $450 AND $600.
YOUR FRIEND IS WILLING TO MAKE THE LOAN TO YOU FOR $600 INTEREST OR MORE. YOU ARE WILLING TO ACCEPT THE LOAN FOR $450 INTEREST OR LESS. SO, THE ACCEPTABILITY GAP BETWEEN YOU AND YOUR FRIEND IS $150.
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SO, ANY INTEREST NEGOTIATION WITH YOU AS THE LENDER THAT IS ACCEPTABLE TO BOTH
YOUR FRIEND IS WILLING TO MAKE THE LOAN TO YOU FOR $600 INTEREST OR MORE. YOU ARE WILLING TO ACCEPT THE LOAN FOR $450 INTEREST OR LESS. SO, THE ACCEPTABILITY GAP
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PROBLEM 1.5
COSTS IN REVS IN NET CUM CUM CUMSTAGE INVESTMENT TODAY'S $ TODAY'S $ REV-COST COSTS REVS REV-COST
1 STATION $180,000 $270,000 $90,000 $180,000 $270,000 $90,0002 ANTENNA $30,000 $50,000 $20,000 $210,000 $320,000 $110,0003 AMPLIFIER $40,000 $30,000 -$10,000 $250,000 $350,000 $100,0004
$30,000 $60,000 $30,000 $280,000 $410,000 $130,0005
$15,000 $5,000 -$10,000 $295,000 $415,000 $120,000
a
b 2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
5. MARGINAL REVENUE MUST EXCEED MARGINAL COST
c 1. IDENTIFY THE INVESTMENT ALTERNATIVES5. COMPARE THE ALTERNATIVES7. SELECT THE PREFERRED ALTERNATIVE
LIGHTNING PROTECTION
CONTROL CONSOLE
PURCHASE THE FIRST FOUR STAGES. NOTE THAT THIS GIVES THE HIGHEST ACCUMULATED TOTAL NET REVENUE-COST. IN TODAY'S $. NOTE THAT THE AMPLIFIER DOES NOT PAY OUT, BUT IT IS NECESSARY FOR THE LIGHTNING PROTECTION THAT PAYS OUT NICELY
3. CHOOSE THE MUTUALLY EXCLUSIVE INVESTMENT ALTERNATIVE THAT MAXIMIZES ECONOMIC WORTH
6. MONEY SHOULD CONTINUE TO BE INVESTED AS LONG AS EACH ADDITIONAL INCREMENT OF INVESTMENT YIELDS A RETURN THAT IS GREATER THAN THE INVESTOR'S TVOM
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PROBLEM 1.6
ORIGINAL WSI BID= $5,500.00
BARB & FRED EXPENSES= $1,900.00$1,100.00 MATERIALS - NO RETURN
$400.00$400.00 JACKHAMMER AT $80 FOR 5 DAYS
REVISED WSI BID= $4,500.00$5,500.00 ORIGINAL-$500.00 MATERIALS-$500.00 TRENCHING
a $1,900.00 BARBARA AND FRED HAVE ALREADY SPENT
b $6,400.00 TOTAL SPENT AFTER WSI
c $6,000.00 SS CHARGE
SUNK COSTS SHOULD NOT BE CONSIDERED.
$4,500 FUTURE SPENDING WITH WSI
$6,000 FUTURE SPENDING WITH SS
GO WITH WSI, NOT SS.
d 2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
e 1. IDENTIFY THE INVESTMENT ALTERNATIVES4. ESTIMATE THE CASH FLOWS5. COMPARE THE ALTERNATIVES7. SELECT THE PREFERRED ALTERNATIVE
TRENCHER AT $80 FOR 5 DAYS
GO WITH WSI, NOT SS. COMPARING SS AT $6,000 AND WSI AT $6,400 TAKES INTO ACCOUNT SUNK COSTS
10. PAST COSTS ARE IRRELEVANT IN ENGINEERING ECONOMIC ANALYSES, UNLESS THEY IMPACT FUTURE COSTS
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SUNK COSTS SHOULD NOT BE CONSIDERED.
2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
1. IDENTIFY THE INVESTMENT ALTERNATIVES4. ESTIMATE THE CASH FLOWS5. COMPARE THE ALTERNATIVES7. SELECT THE PREFERRED ALTERNATIVE
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PROBLEM 1.7
a EXAMPLES OF NON-MONETARY FACTORS INCLUDE:QUALITYSAFETYENVIRONMENTAL IMPACTCOMMUNITY ATTITUDESLABOR-MANAGEMENT RELATIONSHIPSSYSTEM RELIABILITYSYSTEM AVAILABILITYSYSTEM MAINTAINABILITYSYSTEM OPERABILITYSYSTEM FLEXIBILITYIMPACT ON PERSONNEL LEVELSTRAINING REQUIREMENTSCOMPARISON WITH COMPETITORSIMPACT ON DIFFERENT UNITS WITHIN THE ORGANIZATIONBRINGING ABOUT CHANGEEGOCUSTOMER PREFERENCES
b NONE
c 5. COMPARE THE ALTERNATIVES6. PERFORM SUPPLEMENTARY ANALYSES7. SELECT THE PREFERRED ALTERNATIVE
DEPENDING UPON WHAT TYPES OF ALTERNATIVES ARE BEING CONSIDERED, THIS LIST COULD BE ALMOST LIMITLESS.
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PROBLEM 1.8
ACCEPT PROPOSAL: 1REJECT PROPOSAL: 0
a ALT PROP PROP PROP PROP WHY NOT FEASIBLEA B C D
1 0 0 0 02 0 0 0 13 0 0 1 04 0 0 1 15 0 1 0 0 B CONTINGENT ON C OR D6 0 1 0 17 0 1 1 08 0 1 1 19 1 0 0 0 A CONTINGENT ON D
10 1 0 0 111 1 0 1 0 NOT BOTH A AND C A CONTINGENT ON D12 1 0 1 1 NOT BOTH A AND C13 1 1 0 0 B CONTINGENT ON C OR D A CONTINGENT ON D14 1 1 0 115 1 1 1 0 NOT BOTH A AND C A CONTINGENT ON D16 1 1 1 1 NOT BOTH A AND C
b NONE
c 1. IDENTIFY THE INVESTMENT ALTERNATIVES
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PROBLEM 1.9
ACCEPT PROPOSAL: 1 REJECT PROPOSAL: 0
a ALT PROP PROP PROP PROP PROP WHY NOT FEASIBLEV W X Y Z
1 0 0 0 0 0 AT LEAST 2 AND NO MORE THAN 42 0 0 0 0 1
3 0 0 0 1 0 AT LEAST 2 AND NO MORE THAN 44 0 0 0 1 15 0 0 1 0 0 AT LEAST 2 AND NO MORE THAN 46 0 0 1 0 17 0 0 1 1 0 X AND Y MUTUALLY EXCLUSIVE8 0 0 1 1 1 X AND Y MUTUALLY EXCLUSIVE9 0 1 0 0 0 AT LEAST 2 AND NO MORE THAN 4
10 0 1 0 0 1 Z CONTINGENT ON X OR Y11 0 1 0 1 012 0 1 0 1 113 0 1 1 0 014 0 1 1 0 115 0 1 1 1 0 X AND Y MUTUALLY EXCLUSIVE16 0 1 1 1 1 X AND Y MUTUALLY EXCLUSIVE17 1 0 0 0 0 AT LEAST 2 AND NO MORE THAN 418 1 0 0 0 1 Z CONTINGENT ON X OR Y19 1 0 0 1 0 NOT V IF W, X, Y20 1 0 0 1 1 NOT V IF W, X, Y21 1 0 1 0 0 NOT V IF W, X, Y22 1 0 1 0 1 NOT V IF W, X, Y23 1 0 1 1 0
24 1 0 1 1 1
25 1 1 0 0 0 NOT V IF W, X, Y26 1 1 0 0 1 Z CONTINGENT ON X OR Y27 1 1 0 1 0 NOT V IF W, X, Y28 1 1 0 1 1 NOT V IF W, X, Y29 1 1 1 0 0 NOT V IF W, X, Y30 1 1 1 0 1 NOT V IF W, X, Y31 1 1 1 1 0
32 1 1 1 1 1
b NONE
c 1. IDENTIFY THE INVESTMENT ALTERNATIVES
AT LEAST 2 AND NO MORE THAN 4; Z CONTINGENT ON X OR Y
X AND Y MUTUALLY EXCLUSIVE; NOT V IF W, X, Y
X AND Y MUTUALLY EXCLUSIVE; NOT V IF W, X, Y
X AND Y MUTUALLY EXCLUSIVE; NOT V IF W, X, YAT LEAST 2 AND NO MORE THAN 4; X AND Y MUTUALLY EXCLUSIVE; NOT V IF W, X, Y
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PROBLEM 1.10
ACCEPT PROPOSAL: 1 REJECT PROPOSAL: 0
ALTERNATIVE PROPOSAL PROPOSAL PROPOSALP Q R
1 0 0 02 0 0 13 0 1 04 0 1 15 1 0 06 1 0 17 1 1 08 1 1 1
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REJECT PROPOSAL: 0
WHY NOT FEASIBLE
EXACTLY 1 OR 2 CHOSENR CONTINGENT ON P
R CONTINGENT ON P
P AND Q MUTUALLY EXCLUSIVE
EXACTLY 1 OR 2 CHOSEN; P AND Q MUTUALLY EXCLUSIVE
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PROBLEM 1.11
NOTE TO INSTRUCTOR
WHAT YOU SHOULD KNOW ABOUT THIS PROBLEM IS:
THERE IS NO SINGLE CORRECT ANSWER
ECONOMICALLY SPEAKING, THE THREE ARE EQUIVALENT
RETURNED RETURNEDYOU CHANCE OF TO YOU IF CHANCE OF TO YOU IF
ALTERNATIVE INVEST SUCCESS SUCCESS FAILURE FAILUREA $100.00 95% $110.79 5% $95.00B $100.00 60% $150.00 40% $50.00C $100.00 20% $510.00 80% $10.00
a I WOULD SELECT ALTERNATIVE A IF PLAYING THIS ONLY ONCE.
b I STILL DON'T LIKE LOSING $50 OR $90.
c MAY WISH TO MAKE A CASE FOR 2, 3, 4, 5. NUMBER 9 IS FOR SURE.
2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
5. MARGINAL REVENUE MUST EXCEED MARGINAL COST9. RISKS AND RETURNS TEND TO BE POSITIVELY CORRELATED
d
1. IDENTIFY THE INVESTMENT ALTERNATIVES4. ESTIMATE THE CASH FLOWS5. COMPARE THE ALTERNATIVES6. PERFORM SUPPLEMENTARY ANALYSES7. SELECT THE PREFERRED ALTERNATIVE
THIS IS AN INTERESTING PROBLEM, ESPECIALLY WHEN DISCUSSED WITH ITS COMPANION PROBLEM 1.12
THE EXPECTED VALUE (PROBABILITY-WEIGHTED RETURNS LESS PROBABILITY-WEIGHTED FAILURES) IS THE SAME FOR EACH: $10.00.
ONE WHO SELECTS ALTERNATIVE A IS RISK AVERSE (OR QUITE CONSERVATIVE) - MANY WILL GAMBLE $100 ON B OR C
THE STUDENTS SHOULD NOT BE EXPECTED TO DO A PROBABILISTIC ANALYSIS - THEY WILL SEE HOW TO DO THAT IN CHAPTER 13
THE STUDENTS SHOULD BE EXPECTED TO DO A "GUT" ANALYSIS - HOW WOULD THEY ACTUALLY DECIDE HERE?
3. CHOOSE THE MUTUALLY EXCLUSIVE INVESTMENT ALTERNATIVE THAT MAXIMIZES ECONOMIC WORTH
4. TWO INVESTMENT ALTERNATIVES ARE EQUIVALENT IF THEY HAVE THE SAME ECONOMIC WORTH
MAY WANT TO MAKE A CASE FOR 6, WITH THE EV ANALYSIS - ALTHOUGH THAT SHOULD NOT BE EXPECTED
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EXPECTEDVALUE
$10.00$10.00$10.00
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PROBLEM 1.12
NOTE TO INSTRUCTOR
WHAT YOU SHOULD KNOW ABOUT THIS PROBLEM IS:
THERE IS NO SINGLE CORRECT ANSWER
ECONOMICALLY SPEAKING, THE THREE ARE EQUIVALENT
RETURNED RETURNEDYOU CHANCE OF TO YOU IF CHANCE OF TO YOU IF EXPECTED
ALT INVEST SUCCESS SUCCESS FAILURE FAILURE VALUEA $100,000.00 95% $110,789.47 5% $95,000.00 $10,000.00B $100,000.00 60% $150,000.00 40% $50,000.00 $10,000.00C $100,000.00 20% $510,000.01 80% $10,000.00 $10,000.00
a I WOULD SELECT A
b
c MAY WISH TO MAKE A CASE FOR 2, 3, 4, 5. NUMBER 9 IS FOR SURE.
2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
5. MARGINAL REVENUE MUST EXCEED MARGINAL COST9. RISKS AND RETURNS TEND TO BE POSITIVELY CORRELATED
d
1. IDENTIFY THE INVESTMENT ALTERNATIVES4. ESTIMATE THE CASH FLOWS5. COMPARE THE ALTERNATIVES
THIS IS AN INTERESTING PROBLEM, ESPECIALLY WHEN DISCUSSED WITH ITS COMPANION PROBLEM 1.11.
THE EXPECTED VALUE (PROBABILITY-WEIGHTED RETURNS LESS PROBABILITY-WEIGHTED FAILURES) IS THE SAME FOR EACH: $10,000.
ONE WHO SELECTS ALTERNATIVE C IS A RISK SEEKER (OR QUITE RISK PRONE) - NOT MANY WILL GAMBLE ON B OR C
THE STUDENTS SHOULD NOT BE EXPECTED TO DO A PROBABILISTIC ANALYSIS - THEY WILL SEE THAT IN CHAPTER 13
THE STUDENTS SHOULD BE EXPECTED TO DO A "GUT" ANALYSIS - HOW WOULD THEY ACTUALLY DECIDE HERE?
IT HAS A 95% CHANCE OF POCKETING A QUICK PROFIT OF $10,789.47 WITH ONLY $5,000 DOWNSIDE
3. CHOOSE THE MUTUALLY EXCLUSIVE INVESTMENT ALTERNATIVE THAT MAXIMIZES ECONOMIC WORTH
4. TWO INVESTMENT ALTERNATIVES ARE EQUIVALENT IF THEY HAVE THE SAME ECONOMIC WORTH
MAY WANT TO MAKE A CASE FOR 6, WITH THE EV ANALYSIS - ALTHOUGH THAT SHOULD NOT BE EXPECTED
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6. PERFORM SUPPLEMENTARY ANALYSES7. SELECT THE PREFERRED ALTERNATIVE
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PROBLEM 1.13
a
b 2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
5. MARGINAL REVENUE MUST EXCEED MARGINAL COST
c 1. IDENTIFY THE INVESTMENT ALTERNATIVES2. DEFINE THE PLANNING HORIZON (STRONG)4. ESTIMATE THE CASH FLOWS5. COMPARE THE ALTERNATIVES7. SELECT THE PREFERRED ALTERNATIVE
AUTOFOUNDRY SHOULD DO NOTHING AT ALL! THEIR ANALYSIS IS INCORRECT, EVEN IF ALL DATA WERE RIGHT.
THE MAJOR FLAW IS THAT THE TIME HORIZON IN ONE CASE IS 5 YEARS AND 9 IN THE OTHER.
3. CHOOSE THE MUTUALLY EXCLUSIVE INVESTMENT ALTERNATIVE THAT MAXIMIZES ECONOMIC WORTH
4. TWO INVESTMENT ALTERNATIVES ARE EQUIVALENT IF THEY HAVE THE SAME ECONOMIC WORTH
8. COMPARE INVESTMENT ALTERNATIVES OVER A COMMON PERIOD OF TIME (STRONG)
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PROBLEM 1.14
a
b
c
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2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
8. COMPARE INVESTMENT ALTERNATIVES OVER A COMMON PERIOD OF TIME
1. IDENTIFY THE INVESTMENT ALTERNATIVES2. DEFINE THE PLANNING HORIZON5. COMPARE THE ALTERNATIVES7. SELECT THE PREFERRED ALTERNATIVE
USE A 10 YEAR PLANNING HORIZON. THE REASON IS THAT EACH PROJECT IS A ONE-SHOT ALTERNATIVE AND IN ORDER TO CONSIDER EACH, THE PLANNING HORIZON MUST MATCH THAT OF THE LONGEST-LIVED PROJECT OR ALTERNATIVE.
3. CHOOSE THE MUTUALLY EXCLUSIVE INVESTMENT ALTERNATIVE THAT MAXIMIZES ECONOMIC WORTH
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PROBLEM 1.15
a
b. 2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
8. COMPARE INVESTMENT ALTERNATIVES OVER A COMMON PERIOD OF TIME
c. 1. IDENTIFY THE INVESTMENT ALTERNATIVES2. DEFINE THE PLANNING HORIZON5. COMPARE THE ALTERNATIVES7. SELECT THE PREFERRED ALTERNATIVE
VIRTUALLY ANY PLANNING HORIZON COULD BE SELECTED. MOST LIKELY IT WOULD BE SOME NUMBER OF YEARS FROM THE SHORTEST-LIVED ALTERNATIVE (4 YEARS) TO THE LONGEST-LIVED (10 YEARS), ALTHOUGH THIS IS NOT NECESSARILY SO. THE DECISION MAKER MUST FIRST ASK "OVER WHAT PERIOD OF TIME DO I WANT TO MAKE THE BEST DECISION?" FOR ANY SELECTED PLANNING HORIZON, SAY 6 YEARS FOR EXAMPLE, THE 4 YEAR ALTERNATIVE REQUIRES SPECIFICATION OF WHAT WILL HAPPEN IN YEARS 5 AND 6 (SUCH AS REPAVING) AND THEN WILL REQUIRE ESTIMATION OF A RESIDUAL OR SALVAGE VALUE AT THE END OF YEAR 6. IN THE CASE OF THE RV HOOK UPS, A RESIDUAL OR SALVAGE VALUE WOULD NEED TO BE ESTIMATED AT THE END OF 6 YEARS TO PROPERLY REFLECT THE REMAINING VALUE IN THAT ALTERNATIVE AFTER THE 6 YEAR PLANNING HORIZON. SIMILAR THINKING IS REQUIRED FOR ANY OTHER PLANNING HORIZON SELECTED.
3. CHOOSE THE MUTUALLY EXCLUSIVE INVESTMENT ALTERNATIVE THAT MAXIMIZES ECONOMIC WORTH
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PROBLEM 1.16
a BC CI SW WCFACTOR WT RT SC RT SC RT SC RT SC
P 20 9.2 184 10 200 6.7 134 8.2 164Q 30 10 300 7 210 8 240 6 180D 25 9 225 7 175 10 250 7 175R 15 6 90 5 75 7 105 10 150E 10 8 80 9 90 6 60 10 100
TOTALS 879 750 789 769
b
c 2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
d 1. IDENTIFY THE INVESTMENT ALTERNATIVES5. COMPARE THE ALTERNATIVES7. SELECT THE PREFERRED ALTERNATIVE
QUALITY (Q), DELIVERY (D), AND RELIABILITY (R) ARE ALL BETTER FOR BC THAN FOR CI. THEY OVERCAME THE $85,000 - $79,000 = $6,000 PRICE DIFFERENCE OF CI OVER BC. THEREFORE, THEY MUST BE WORTH AT LEAST $6,000.
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PROBLEM 1.17 NOTE! THIS PROBLEM IS SIMILAR TO EXAMPLE 1.8
a A B C DFACTOR WT RT SC RT SC RT SC RT SC
PW 35 6.3 220.5 10 350 7.5 262.5 8.8 308PP 40 9.1 364 7.7 308 10 400 5.8 232RL 25 7.5 187.5 9 225 9 225 10 250
TOTALS 772 883 887.5 790
RECOMMEND ALTERNATIVE C BY A SMALL MARGIN OVER B
b
c 2. MAKE INVESTMENTS THAT ARE ECONOMICALLY JUSTIFIED
d 1. IDENTIFY THE INVESTMENT ALTERNATIVES5. COMPARE THE ALTERNATIVES7. SELECT THE PREFERRED ALTERNATIVE
PAYBACK PERIOD WAS THE DIFFERENCE MAKER IN SELECTING C OVER B, EVEN THOUGH B HAD A HIGHER PRESENT WORTH ($300,000) THAN C ($225,000) FOR A DIFFERENCE OF $75,000. PAYBACK PERIOD FROM 3 TO 1 YEARS MUST BE WORTH AT LEAST $75,000 TO THE COMPANY.
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PROBLEM 1.18
COST/GAL G1= $7.50COST/GAL G2= $13.50% BLUE G1= 11.00%% BLUE G2= 22.00%
DESIRED % BLUE 18.00%X= PROPORTION OF G1 USED IN FINAL MIXTURE
1-X= PROPORTION OF G2 USED IN FINAL MIXTURE
a SOLVING FOR X% BLUE FORMULA= 18.00% =11%*X+22%*(1-X)REARRANGING TERMS= 11%*X=4%
X= 36.36% =(22.00%-18.00%)/(22.00%-11.00%)1-X= 63.64% =1-36.36%
USE 36.36% OF G1 AND 63.64% OF G2 IN THE FINAL PAINT MIXTURE
b COST EQUATIONCOST= $11.32 =7.5*36.36%+13.5*(1-36.36%)
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PROBLEM 1.19
ORDER SIZE= 500,000 UNITSOLD MATERIAL COST/UNIT= $0.75OLD LABOR COST/UNIT= $0.25NEW MATERIAL COST/UNIT= $0.52NEW LABOR COST/UNIT= $0.16ADDITIONAL TOOLING COST= $90,000.00
TOTAL COST = MATERIAL COST + LABOR COST + NON-FACTORY COST
a CONTINUE OLD METHODMATERIAL COST= $187,500.00 =(500000/2)*0.75LABOR COST= $62,500.00 =(500000/2)*0.25NON-FACTORY COST= $125,000.00 =2*62500TOTAL COST= $375,000.00 =187500+62500+125000
b SWITCH TO NEW METHODNEW TOOLING COST= $90,000.00 =90000MATERIAL COST= $130,000.00 =(500000/2)*0.52NEW LABOR COST/UNIT= $40,000.00 =(500000/2)*0.16NON-FACTORY COST= $80,000.00 =2*40000TOTAL COST= $340,000.00 =90000+130000+40000+80000
c SWITCH TO THE NEW METHOD - LESS COSTLY
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PROBLEM 1.20
COST/GAL A= $1.00COST/GAL B= $2.50
% CRANBERRY A= 12.50%% CRANBERRY B= 20.00%
DESIRED % CRANBERRY 15.50%X= PROPORTION OF CRANBERRY A USED IN FINAL MIXTURE
1-X= PROPORTION OF CRANBERRY B USED IN FINAL MIXTURE
a SOLVING FOR X% CRANBERRY FORMULA 15.50% =12.5%*X+20%*(1-X)
REARRANGING TERMS= 7.5%*X=4.5%X= 60.00% =(20.00%-15.50%)/(20.00%-12.50%)
1-X= 40.00% =1-60%USE 60.0% OF A AND 40.0% OF B IN THE FINAL CRANBERRY MIXTURE
b COST EQUATIONCOST/GAL= $1.60 =1*60%+2.5*(1-60%)
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PROBLEM 1.21
COST OF RAW MAT'L A PER LB= $5.18COST OF RAW MAT'L B PER LB= $1.61COST OF RAW MAT'L C PER LB= $2.82
ALTERNATIVE 1 ALTERNATIVE 2COST OF RAW MAT'L A PER UNIT=LBS/UNIT= 0.050 0.070COST A/UNIT CALCULATIONS ARE= =$5.18*0.05 =$5.18*0.07COST A/UNIT= $0.2590 $0.3626
COST OF RAW MAT'L B PER UNIT=LBS/UNIT= 0.190 0.180COST B/UNIT CALCULATIONS ARE= =$1.61*0.190 =$1.61*0.180COST B/UNIT= $0.3059 $0.2898
COST OF RAW MAT'L C PER UNIT=LBS/UNIT= 0.140 0.120COST C/UNIT CALCULATIONS ARE= =$2.82*0.140 =$2.82*0.120COST C/UNIT= $0.3948 $0.3384
TOTAL RAW MAT'L COST/UNIT $0.9597 $0.9908
OTHER COSTS/UNIT $0.2400 $0.3600
TOTAL COSTS/UNIT= $1.1997 $1.3508
PRICE/UNIT= $1.4300 $1.5800
PROFIT/UNIT $0.2303 $0.2292
SALES VOLUME= 1,000,000 1,250,000
TOTAL PROFIT= $230,300 $286,500
SELECT ALTERNATIVE 2 TO MAXIMIZE PROFIT
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ALTERNATIVE 3
0.075=$5.18*0.075
$0.3885
0.260=$1.61*0.260
$0.4186
0.170=$2.82*0.170
$0.4794
$1.2865
$0.3400
$1.6265
$1.8800
$0.2535
800,000
$202,800
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PROBLEM 1.22
LABOR COST PER ACCEPTABLE UNIT $1.40
COST OF MATERIAL PER UNIT $5.50
PRODUCTION RATE 100 125 150REJECTION RATE 3.00% 8.00% 20.00%ACCEPTABLE UNITS 97 115 120
LABOR COST AT $1.40/ACCEPTABLE UNIT $135.80 $161.00 $168.00COST OF MATERIAL AT $5.50 PER UNIT $550.00 $687.50 $825.00
TOTAL DAILY COSTS $685.80 $848.50 $993.00COST PER ACCEPTABLE UNIT $7.07 $7.38 $8.28
a WORKERS PREFER 150 UNIT PRODUCTION RATE TO MAX DAILY PAY AT $168.00
b PRODUCTION RATE FOR LOWEST UNIT COST PER ACCEPTABLE UNIT IS 100 UNITS
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10111213141516171819
PROBLEM 1.23
ORDER SIZE X
COMPARING M1 TO M2:300+9X=750+3X6X=450X=75 M1 PREFERRED TO M2 AT 75 OR LESS
M2 PREFERRED TO M1 AT 75 OR MORECOMPARING M1 TO M3300+9X=500+5X4X=200X=50 M1 PREFERRED TO M3 AT 50 OR LESS
M3 PREFERRED TO M1 AT 50 OR MORECOMPARING M2 TO M3750+3X=500+5X2X=250X=125 M3 PREFERRED TO M2 AT 125 OR LESS
M2 PREFERRED TO M3 AT 125 OR MOREa USE M1 FOR X OF 0 TO 50
USE M3 FOR X OF 50 TO 125
USE M2 FOR X OF 125 OR MORE
GRAPHICAL REPRESENTATION OF BREAKEVEN POINTSTHIS GRAPH WAS DEVELOPED FROM THE TABLE OF COSTS AFTER PART c
b FOR X=75 USE M3 FOR $875 =500+5*75
c FOR X=160 USE M2 FOR $1230 =750+3*160IF NOT AVAILABLE, USE M3 FOR $1300 =500+5*160
PENALTY IS $70 EXTRA OVER M2
IF NEITHER AVAILABLE, USE M1 FOR $1740 =300+9*160PENALTY IS $510 EXTRA OVER M2PENALTY IS $440 EXTRA OVER M3
1 16 31 46 61 76 91 106121136151166181196$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
TOOL M1TOOL M2TOOL M3
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10111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455
SEE COMPLETE TABLE OF COSTS BELOWMACHINE MACHINE MACHINETOOL M1 TOOL M2 TOOL M3
FIXED COST= $300.00 $750.00 $500.00VARIABLE COST/UNIT= $9.00 $3.00 $5.00
MACHINE MACHINE MACHINEORDER SIZE TOOL M1 TOOL M2 TOOL M3
1 $309.00 $753.00 $505.002 $318.00 $756.00 $510.003 $327.00 $759.00 $515.004 $336.00 $762.00 $520.005 $345.00 $765.00 $525.006 $354.00 $768.00 $530.007 $363.00 $771.00 $535.008 $372.00 $774.00 $540.009 $381.00 $777.00 $545.00
10 $390.00 $780.00 $550.0011 $399.00 $783.00 $555.0012 $408.00 $786.00 $560.0013 $417.00 $789.00 $565.0014 $426.00 $792.00 $570.0015 $435.00 $795.00 $575.0016 $444.00 $798.00 $580.0017 $453.00 $801.00 $585.0018 $462.00 $804.00 $590.0019 $471.00 $807.00 $595.0020 $480.00 $810.00 $600.0021 $489.00 $813.00 $605.0022 $498.00 $816.00 $610.0023 $507.00 $819.00 $615.0024 $516.00 $822.00 $620.0025 $525.00 $825.00 $625.0026 $534.00 $828.00 $630.0027 $543.00 $831.00 $635.0028 $552.00 $834.00 $640.0029 $561.00 $837.00 $645.0030 $570.00 $840.00 $650.0031 $579.00 $843.00 $655.0032 $588.00 $846.00 $660.0033 $597.00 $849.00 $665.0034 $606.00 $852.00 $670.0035 $615.00 $855.00 $675.0036 $624.00 $858.00 $680.0037 $633.00 $861.00 $685.0038 $642.00 $864.00 $690.0039 $651.00 $867.00 $695.0040 $660.00 $870.00 $700.0041 $669.00 $873.00 $705.0042 $678.00 $876.00 $710.0043 $687.00 $879.00 $715.0044 $696.00 $882.00 $720.0045 $705.00 $885.00 $725.0046 $714.00 $888.00 $730.00
A B C D E F5657585960616263646566676869707172737475767778798081828384858687888990919293949596979899
100101102103104105106107108109110
47 $723.00 $891.00 $735.0048 $732.00 $894.00 $740.0049 $741.00 $897.00 $745.0050 $750.00 $900.00 $750.0051 $759.00 $903.00 $755.0052 $768.00 $906.00 $760.0053 $777.00 $909.00 $765.0054 $786.00 $912.00 $770.0055 $795.00 $915.00 $775.0056 $804.00 $918.00 $780.0057 $813.00 $921.00 $785.0058 $822.00 $924.00 $790.0059 $831.00 $927.00 $795.0060 $840.00 $930.00 $800.0061 $849.00 $933.00 $805.0062 $858.00 $936.00 $810.0063 $867.00 $939.00 $815.0064 $876.00 $942.00 $820.0065 $885.00 $945.00 $825.0066 $894.00 $948.00 $830.0067 $903.00 $951.00 $835.0068 $912.00 $954.00 $840.0069 $921.00 $957.00 $845.0070 $930.00 $960.00 $850.0071 $939.00 $963.00 $855.0072 $948.00 $966.00 $860.0073 $957.00 $969.00 $865.0074 $966.00 $972.00 $870.0075 $975.00 $975.00 $875.0076 $984.00 $978.00 $880.0077 $993.00 $981.00 $885.0078 $1,002.00 $984.00 $890.0079 $1,011.00 $987.00 $895.0080 $1,020.00 $990.00 $900.0081 $1,029.00 $993.00 $905.0082 $1,038.00 $996.00 $910.0083 $1,047.00 $999.00 $915.0084 $1,056.00 $1,002.00 $920.0085 $1,065.00 $1,005.00 $925.0086 $1,074.00 $1,008.00 $930.0087 $1,083.00 $1,011.00 $935.0088 $1,092.00 $1,014.00 $940.0089 $1,101.00 $1,017.00 $945.0090 $1,110.00 $1,020.00 $950.0091 $1,119.00 $1,023.00 $955.0092 $1,128.00 $1,026.00 $960.0093 $1,137.00 $1,029.00 $965.0094 $1,146.00 $1,032.00 $970.0095 $1,155.00 $1,035.00 $975.0096 $1,164.00 $1,038.00 $980.0097 $1,173.00 $1,041.00 $985.0098 $1,182.00 $1,044.00 $990.0099 $1,191.00 $1,047.00 $995.00
100 $1,200.00 $1,050.00 $1,000.00101 $1,209.00 $1,053.00 $1,005.00
A B C D E F111112113114115116117118119120121122123124125126127128129130131132133134135136137138139140141142143144145146147148149150151152153154155156157158159160161162163164165
102 $1,218.00 $1,056.00 $1,010.00103 $1,227.00 $1,059.00 $1,015.00104 $1,236.00 $1,062.00 $1,020.00105 $1,245.00 $1,065.00 $1,025.00106 $1,254.00 $1,068.00 $1,030.00107 $1,263.00 $1,071.00 $1,035.00108 $1,272.00 $1,074.00 $1,040.00109 $1,281.00 $1,077.00 $1,045.00110 $1,290.00 $1,080.00 $1,050.00111 $1,299.00 $1,083.00 $1,055.00112 $1,308.00 $1,086.00 $1,060.00113 $1,317.00 $1,089.00 $1,065.00114 $1,326.00 $1,092.00 $1,070.00115 $1,335.00 $1,095.00 $1,075.00116 $1,344.00 $1,098.00 $1,080.00117 $1,353.00 $1,101.00 $1,085.00118 $1,362.00 $1,104.00 $1,090.00119 $1,371.00 $1,107.00 $1,095.00120 $1,380.00 $1,110.00 $1,100.00121 $1,389.00 $1,113.00 $1,105.00122 $1,398.00 $1,116.00 $1,110.00123 $1,407.00 $1,119.00 $1,115.00124 $1,416.00 $1,122.00 $1,120.00125 $1,425.00 $1,125.00 $1,125.00126 $1,434.00 $1,128.00 $1,130.00127 $1,443.00 $1,131.00 $1,135.00128 $1,452.00 $1,134.00 $1,140.00129 $1,461.00 $1,137.00 $1,145.00130 $1,470.00 $1,140.00 $1,150.00131 $1,479.00 $1,143.00 $1,155.00132 $1,488.00 $1,146.00 $1,160.00133 $1,497.00 $1,149.00 $1,165.00134 $1,506.00 $1,152.00 $1,170.00135 $1,515.00 $1,155.00 $1,175.00136 $1,524.00 $1,158.00 $1,180.00137 $1,533.00 $1,161.00 $1,185.00138 $1,542.00 $1,164.00 $1,190.00139 $1,551.00 $1,167.00 $1,195.00140 $1,560.00 $1,170.00 $1,200.00141 $1,569.00 $1,173.00 $1,205.00142 $1,578.00 $1,176.00 $1,210.00143 $1,587.00 $1,179.00 $1,215.00144 $1,596.00 $1,182.00 $1,220.00145 $1,605.00 $1,185.00 $1,225.00146 $1,614.00 $1,188.00 $1,230.00147 $1,623.00 $1,191.00 $1,235.00148 $1,632.00 $1,194.00 $1,240.00149 $1,641.00 $1,197.00 $1,245.00150 $1,650.00 $1,200.00 $1,250.00151 $1,659.00 $1,203.00 $1,255.00152 $1,668.00 $1,206.00 $1,260.00153 $1,677.00 $1,209.00 $1,265.00154 $1,686.00 $1,212.00 $1,270.00155 $1,695.00 $1,215.00 $1,275.00156 $1,704.00 $1,218.00 $1,280.00
A B C D E F166167168169170171172173174175176177178179180181182183184185186187188189190191192193194195196197198199200201202203204205206207208209210211212213214215216217218219220
157 $1,713.00 $1,221.00 $1,285.00158 $1,722.00 $1,224.00 $1,290.00159 $1,731.00 $1,227.00 $1,295.00160 $1,740.00 $1,230.00 $1,300.00161 $1,749.00 $1,233.00 $1,305.00162 $1,758.00 $1,236.00 $1,310.00163 $1,767.00 $1,239.00 $1,315.00164 $1,776.00 $1,242.00 $1,320.00165 $1,785.00 $1,245.00 $1,325.00166 $1,794.00 $1,248.00 $1,330.00167 $1,803.00 $1,251.00 $1,335.00168 $1,812.00 $1,254.00 $1,340.00169 $1,821.00 $1,257.00 $1,345.00170 $1,830.00 $1,260.00 $1,350.00171 $1,839.00 $1,263.00 $1,355.00172 $1,848.00 $1,266.00 $1,360.00173 $1,857.00 $1,269.00 $1,365.00174 $1,866.00 $1,272.00 $1,370.00175 $1,875.00 $1,275.00 $1,375.00176 $1,884.00 $1,278.00 $1,380.00177 $1,893.00 $1,281.00 $1,385.00178 $1,902.00 $1,284.00 $1,390.00179 $1,911.00 $1,287.00 $1,395.00180 $1,920.00 $1,290.00 $1,400.00181 $1,929.00 $1,293.00 $1,405.00182 $1,938.00 $1,296.00 $1,410.00183 $1,947.00 $1,299.00 $1,415.00184 $1,956.00 $1,302.00 $1,420.00185 $1,965.00 $1,305.00 $1,425.00186 $1,974.00 $1,308.00 $1,430.00187 $1,983.00 $1,311.00 $1,435.00188 $1,992.00 $1,314.00 $1,440.00189 $2,001.00 $1,317.00 $1,445.00190 $2,010.00 $1,320.00 $1,450.00191 $2,019.00 $1,323.00 $1,455.00192 $2,028.00 $1,326.00 $1,460.00193 $2,037.00 $1,329.00 $1,465.00194 $2,046.00 $1,332.00 $1,470.00195 $2,055.00 $1,335.00 $1,475.00196 $2,064.00 $1,338.00 $1,480.00197 $2,073.00 $1,341.00 $1,485.00198 $2,082.00 $1,344.00 $1,490.00199 $2,091.00 $1,347.00 $1,495.00200 $2,100.00 $1,350.00 $1,500.00
A B C D E F221222223224225226227228229230231232233234235236237238239240241242243244245246247248249250251252253254255256257258259260261262263264
PROBLEM 1.24
a AVERAGE TOTAL COSTSQUARE FEET FLOORS TOTAL COST COST PER FLOOR DECREASE
400,000 1 $112,800,000.00 $112,800,000.00 N/A400,000 2 $73,600,000.00 $36,800,000.00 $39,200,000.00400,000 3 $61,066,666.67 $20,355,555.56 $12,533,333.33400,000 4 $55,200,000.00 $13,800,000.00 $5,866,666.67400,000 5 $52,000,000.00 $10,400,000.00 $3,200,000.00400,000 6 $50,133,333.33 $8,355,555.56 $1,866,666.67400,000 7 $49,028,571.43 $7,004,081.63 $1,104,761.90400,000 8 $48,400,000.00 $6,050,000.00 $628,571.43400,000 9 $48,088,888.89 $5,343,209.88 $311,111.11400,000 10 $48,000,000.00 $4,800,000.00 $88,888.89 ***400,000 11 $48,072,727.27 $4,370,247.93 -$72,727.27400,000 12 $48,266,666.67 $4,022,222.22 -$193,939.39
b *** OPTIMUM IS 10 FLOORS
c TC= (200+80X+2(X^2))(400,000/XNOTE THAT A=400,000/X
dTC/dX= (80+4X)(400,000/X)+(200+80X+2(X^2))(-400,000/X^2)=0
800,000-80,000,000/X^2=0
X^2=80,000,000/800,000=100
X=10
THIS AGREES WITH THE 10 FLOORS SPECIFIED IN THE TABLE.
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10111213141516171819202122232425262728293031
PROBLEM 1.25
a ENGINE LATHE EQN TC=$7QTURRET LATHE EQN TC=$120N+5.25Q
N=1 FOR Q=1 TO 300N=2 FOR Q=301 TO 600, ETC.
SETTING THE TWO TC EQUATIONS EQUAL FOR N=1,$7Q=$120+$5.25Q1.75Q=120
Q=120/1.75= 68.57 UNITS USE ENGINE LATHE IF Q=68 OR LESSUSE TURRET LATHE IF Q=69 TO 300
SETTING THE TWO EQUATIONS EQUAL FOR N=2,$7Q=$240+$5.25Q1.75Q=240
Q=240/1.75= 137.14 UNITS SINCE THIS IS BELOW 301,USE TURRET LATHE IF Q=301 TO 600
GRAPHICAL REPRESENTATION OF BREAKEVEN POINTTHIS GRAPH WAS DEVELOPED FROM THE TABLE OF COSTS AFTER PART c
b Q= 68 UNITSN= 1 SETUPTC(ENGINE LATHE)= $476.00 =7*68
1 35 69 103137171205239273307341375409443477511545579$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
ENGINE LTURRET L
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10111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455
TC(TURRET LATHE)= $477.00 =120*1+5.25*68USE ENGINE LATHE FOR Q=68
c Q= 400 UNITSN= 2 SETUPSENGINE LATHE TC= $2,800.00 =7*400TURRET LATHE TC= $2,340.00 =120*2+5.25*400SAVINGS WITH TURRET LATHE= $460.00 =2800-2340
BRUTE FORCE TABLE OF COSTS FOR Q FROM 0 TO 600Q N ENGINE L TURRET L0 1 $0.00 $120.001 1 $7.00 $125.252 1 $14.00 $130.503 1 $21.00 $135.754 1 $28.00 $141.005 1 $35.00 $146.256 1 $42.00 $151.507 1 $49.00 $156.758 1 $56.00 $162.009 1 $63.00 $167.25
10 1 $70.00 $172.5011 1 $77.00 $177.7512 1 $84.00 $183.0013 1 $91.00 $188.2514 1 $98.00 $193.5015 1 $105.00 $198.7516 1 $112.00 $204.0017 1 $119.00 $209.2518 1 $126.00 $214.5019 1 $133.00 $219.7520 1 $140.00 $225.0021 1 $147.00 $230.2522 1 $154.00 $235.5023 1 $161.00 $240.7524 1 $168.00 $246.0025 1 $175.00 $251.2526 1 $182.00 $256.5027 1 $189.00 $261.7528 1 $196.00 $267.0029 1 $203.00 $272.2530 1 $210.00 $277.5031 1 $217.00 $282.7532 1 $224.00 $288.0033 1 $231.00 $293.2534 1 $238.00 $298.5035 1 $245.00 $303.7536 1 $252.00 $309.0037 1 $259.00 $314.2538 1 $266.00 $319.5039 1 $273.00 $324.7540 1 $280.00 $330.0041 1 $287.00 $335.2542 1 $294.00 $340.50
A B C D E F G5657585960616263646566676869707172737475767778798081828384858687888990919293949596979899
100101102103104105106107108109110
43 1 $301.00 $345.7544 1 $308.00 $351.0045 1 $315.00 $356.2546 1 $322.00 $361.5047 1 $329.00 $366.7548 1 $336.00 $372.0049 1 $343.00 $377.2550 1 $350.00 $382.5051 1 $357.00 $387.7552 1 $364.00 $393.0053 1 $371.00 $398.2554 1 $378.00 $403.5055 1 $385.00 $408.7556 1 $392.00 $414.0057 1 $399.00 $419.2558 1 $406.00 $424.5059 1 $413.00 $429.7560 1 $420.00 $435.0061 1 $427.00 $440.2562 1 $434.00 $445.5063 1 $441.00 $450.7564 1 $448.00 $456.0065 1 $455.00 $461.2566 1 $462.00 $466.5067 1 $469.00 $471.7568 1 $476.00 $477.0069 1 $483.00 $482.2570 1 $490.00 $487.5071 1 $497.00 $492.7572 1 $504.00 $498.0073 1 $511.00 $503.2574 1 $518.00 $508.5075 1 $525.00 $513.7576 1 $532.00 $519.0077 1 $539.00 $524.2578 1 $546.00 $529.5079 1 $553.00 $534.7580 1 $560.00 $540.0081 1 $567.00 $545.2582 1 $574.00 $550.5083 1 $581.00 $555.7584 1 $588.00 $561.0085 1 $595.00 $566.2586 1 $602.00 $571.5087 1 $609.00 $576.7588 1 $616.00 $582.0089 1 $623.00 $587.2590 1 $630.00 $592.5091 1 $637.00 $597.7592 1 $644.00 $603.0093 1 $651.00 $608.2594 1 $658.00 $613.5095 1 $665.00 $618.7596 1 $672.00 $624.0097 1 $679.00 $629.25
A B C D E F G111112113114115116117118119120121122123124125126127128129130131132133134135136137138139140141142143144145146147148149150151152153154155156157158159160161162163164165
98 1 $686.00 $634.5099 1 $693.00 $639.75
100 1 $700.00 $645.00101 1 $707.00 $650.25102 1 $714.00 $655.50103 1 $721.00 $660.75104 1 $728.00 $666.00105 1 $735.00 $671.25106 1 $742.00 $676.50107 1 $749.00 $681.75108 1 $756.00 $687.00109 1 $763.00 $692.25110 1 $770.00 $697.50111 1 $777.00 $702.75112 1 $784.00 $708.00113 1 $791.00 $713.25114 1 $798.00 $718.50115 1 $805.00 $723.75116 1 $812.00 $729.00117 1 $819.00 $734.25118 1 $826.00 $739.50119 1 $833.00 $744.75120 1 $840.00 $750.00121 1 $847.00 $755.25122 1 $854.00 $760.50123 1 $861.00 $765.75124 1 $868.00 $771.00125 1 $875.00 $776.25126 1 $882.00 $781.50127 1 $889.00 $786.75128 1 $896.00 $792.00129 1 $903.00 $797.25130 1 $910.00 $802.50131 1 $917.00 $807.75132 1 $924.00 $813.00133 1 $931.00 $818.25134 1 $938.00 $823.50135 1 $945.00 $828.75136 1 $952.00 $834.00137 1 $959.00 $839.25138 1 $966.00 $844.50139 1 $973.00 $849.75140 1 $980.00 $855.00141 1 $987.00 $860.25142 1 $994.00 $865.50143 1 $1,001.00 $870.75144 1 $1,008.00 $876.00145 1 $1,015.00 $881.25146 1 $1,022.00 $886.50147 1 $1,029.00 $891.75148 1 $1,036.00 $897.00149 1 $1,043.00 $902.25150 1 $1,050.00 $907.50151 1 $1,057.00 $912.75152 1 $1,064.00 $918.00
A B C D E F G166167168169170171172173174175176177178179180181182183184185186187188189190191192193194195196197198199200201202203204205206207208209210211212213214215216217218219220
153 1 $1,071.00 $923.25154 1 $1,078.00 $928.50155 1 $1,085.00 $933.75156 1 $1,092.00 $939.00157 1 $1,099.00 $944.25158 1 $1,106.00 $949.50159 1 $1,113.00 $954.75160 1 $1,120.00 $960.00161 1 $1,127.00 $965.25162 1 $1,134.00 $970.50163 1 $1,141.00 $975.75164 1 $1,148.00 $981.00165 1 $1,155.00 $986.25166 1 $1,162.00 $991.50167 1 $1,169.00 $996.75168 1 $1,176.00 $1,002.00169 1 $1,183.00 $1,007.25170 1 $1,190.00 $1,012.50171 1 $1,197.00 $1,017.75172 1 $1,204.00 $1,023.00173 1 $1,211.00 $1,028.25174 1 $1,218.00 $1,033.50175 1 $1,225.00 $1,038.75176 1 $1,232.00 $1,044.00177 1 $1,239.00 $1,049.25178 1 $1,246.00 $1,054.50179 1 $1,253.00 $1,059.75180 1 $1,260.00 $1,065.00181 1 $1,267.00 $1,070.25182 1 $1,274.00 $1,075.50183 1 $1,281.00 $1,080.75184 1 $1,288.00 $1,086.00185 1 $1,295.00 $1,091.25186 1 $1,302.00 $1,096.50187 1 $1,309.00 $1,101.75188 1 $1,316.00 $1,107.00189 1 $1,323.00 $1,112.25190 1 $1,330.00 $1,117.50191 1 $1,337.00 $1,122.75192 1 $1,344.00 $1,128.00193 1 $1,351.00 $1,133.25194 1 $1,358.00 $1,138.50195 1 $1,365.00 $1,143.75196 1 $1,372.00 $1,149.00197 1 $1,379.00 $1,154.25198 1 $1,386.00 $1,159.50199 1 $1,393.00 $1,164.75200 1 $1,400.00 $1,170.00201 1 $1,407.00 $1,175.25202 1 $1,414.00 $1,180.50203 1 $1,421.00 $1,185.75204 1 $1,428.00 $1,191.00205 1 $1,435.00 $1,196.25206 1 $1,442.00 $1,201.50207 1 $1,449.00 $1,206.75
A B C D E F G221222223224225226227228229230231232233234235236237238239240241242243244245246247248249250251252253254255256257258259260261262263264265266267268269270271272273274275
208 1 $1,456.00 $1,212.00209 1 $1,463.00 $1,217.25210 1 $1,470.00 $1,222.50211 1 $1,477.00 $1,227.75212 1 $1,484.00 $1,233.00213 1 $1,491.00 $1,238.25214 1 $1,498.00 $1,243.50215 1 $1,505.00 $1,248.75216 1 $1,512.00 $1,254.00217 1 $1,519.00 $1,259.25218 1 $1,526.00 $1,264.50219 1 $1,533.00 $1,269.75220 1 $1,540.00 $1,275.00221 1 $1,547.00 $1,280.25222 1 $1,554.00 $1,285.50223 1 $1,561.00 $1,290.75224 1 $1,568.00 $1,296.00225 1 $1,575.00 $1,301.25226 1 $1,582.00 $1,306.50227 1 $1,589.00 $1,311.75228 1 $1,596.00 $1,317.00229 1 $1,603.00 $1,322.25230 1 $1,610.00 $1,327.50231 1 $1,617.00 $1,332.75232 1 $1,624.00 $1,338.00233 1 $1,631.00 $1,343.25234 1 $1,638.00 $1,348.50235 1 $1,645.00 $1,353.75236 1 $1,652.00 $1,359.00237 1 $1,659.00 $1,364.25238 1 $1,666.00 $1,369.50239 1 $1,673.00 $1,374.75240 1 $1,680.00 $1,380.00241 1 $1,687.00 $1,385.25242 1 $1,694.00 $1,390.50243 1 $1,701.00 $1,395.75244 1 $1,708.00 $1,401.00245 1 $1,715.00 $1,406.25246 1 $1,722.00 $1,411.50247 1 $1,729.00 $1,416.75248 1 $1,736.00 $1,422.00249 1 $1,743.00 $1,427.25250 1 $1,750.00 $1,432.50251 1 $1,757.00 $1,437.75252 1 $1,764.00 $1,443.00253 1 $1,771.00 $1,448.25254 1 $1,778.00 $1,453.50255 1 $1,785.00 $1,458.75256 1 $1,792.00 $1,464.00257 1 $1,799.00 $1,469.25258 1 $1,806.00 $1,474.50259 1 $1,813.00 $1,479.75260 1 $1,820.00 $1,485.00261 1 $1,827.00 $1,490.25262 1 $1,834.00 $1,495.50
A B C D E F G276277278279280281282283284285286287288289290291292293294295296297298299300301302303304305306307308309310311312313314315316317318319320321322323324325326327328329330
263 1 $1,841.00 $1,500.75264 1 $1,848.00 $1,506.00265 1 $1,855.00 $1,511.25266 1 $1,862.00 $1,516.50267 1 $1,869.00 $1,521.75268 1 $1,876.00 $1,527.00269 1 $1,883.00 $1,532.25270 1 $1,890.00 $1,537.50271 1 $1,897.00 $1,542.75272 1 $1,904.00 $1,548.00273 1 $1,911.00 $1,553.25274 1 $1,918.00 $1,558.50275 1 $1,925.00 $1,563.75276 1 $1,932.00 $1,569.00277 1 $1,939.00 $1,574.25278 1 $1,946.00 $1,579.50279 1 $1,953.00 $1,584.75280 1 $1,960.00 $1,590.00281 1 $1,967.00 $1,595.25282 1 $1,974.00 $1,600.50283 1 $1,981.00 $1,605.75284 1 $1,988.00 $1,611.00285 1 $1,995.00 $1,616.25286 1 $2,002.00 $1,621.50287 1 $2,009.00 $1,626.75288 1 $2,016.00 $1,632.00289 1 $2,023.00 $1,637.25290 1 $2,030.00 $1,642.50291 1 $2,037.00 $1,647.75292 1 $2,044.00 $1,653.00293 1 $2,051.00 $1,658.25294 1 $2,058.00 $1,663.50295 1 $2,065.00 $1,668.75296 1 $2,072.00 $1,674.00297 1 $2,079.00 $1,679.25298 1 $2,086.00 $1,684.50299 1 $2,093.00 $1,689.75300 1 $2,100.00 $1,695.00301 2 $2,107.00 $1,820.25302 2 $2,114.00 $1,825.50303 2 $2,121.00 $1,830.75304 2 $2,128.00 $1,836.00305 2 $2,135.00 $1,841.25306 2 $2,142.00 $1,846.50307 2 $2,149.00 $1,851.75308 2 $2,156.00 $1,857.00309 2 $2,163.00 $1,862.25310 2 $2,170.00 $1,867.50311 2 $2,177.00 $1,872.75312 2 $2,184.00 $1,878.00313 2 $2,191.00 $1,883.25314 2 $2,198.00 $1,888.50315 2 $2,205.00 $1,893.75316 2 $2,212.00 $1,899.00317 2 $2,219.00 $1,904.25
A B C D E F G331332333334335336337338339340341342343344345346347348349350351352353354355356357358359360361362363364365366367368369370371372373374375376377378379380381382383384385
318 2 $2,226.00 $1,909.50319 2 $2,233.00 $1,914.75320 2 $2,240.00 $1,920.00321 2 $2,247.00 $1,925.25322 2 $2,254.00 $1,930.50323 2 $2,261.00 $1,935.75324 2 $2,268.00 $1,941.00325 2 $2,275.00 $1,946.25326 2 $2,282.00 $1,951.50327 2 $2,289.00 $1,956.75328 2 $2,296.00 $1,962.00329 2 $2,303.00 $1,967.25330 2 $2,310.00 $1,972.50331 2 $2,317.00 $1,977.75332 2 $2,324.00 $1,983.00333 2 $2,331.00 $1,988.25334 2 $2,338.00 $1,993.50335 2 $2,345.00 $1,998.75336 2 $2,352.00 $2,004.00337 2 $2,359.00 $2,009.25338 2 $2,366.00 $2,014.50339 2 $2,373.00 $2,019.75340 2 $2,380.00 $2,025.00341 2 $2,387.00 $2,030.25342 2 $2,394.00 $2,035.50343 2 $2,401.00 $2,040.75344 2 $2,408.00 $2,046.00345 2 $2,415.00 $2,051.25346 2 $2,422.00 $2,056.50347 2 $2,429.00 $2,061.75348 2 $2,436.00 $2,067.00349 2 $2,443.00 $2,072.25350 2 $2,450.00 $2,077.50351 2 $2,457.00 $2,082.75352 2 $2,464.00 $2,088.00353 2 $2,471.00 $2,093.25354 2 $2,478.00 $2,098.50355 2 $2,485.00 $2,103.75356 2 $2,492.00 $2,109.00357 2 $2,499.00 $2,114.25358 2 $2,506.00 $2,119.50359 2 $2,513.00 $2,124.75360 2 $2,520.00 $2,130.00361 2 $2,527.00 $2,135.25362 2 $2,534.00 $2,140.50363 2 $2,541.00 $2,145.75364 2 $2,548.00 $2,151.00365 2 $2,555.00 $2,156.25366 2 $2,562.00 $2,161.50367 2 $2,569.00 $2,166.75368 2 $2,576.00 $2,172.00369 2 $2,583.00 $2,177.25370 2 $2,590.00 $2,182.50371 2 $2,597.00 $2,187.75372 2 $2,604.00 $2,193.00
A B C D E F G386387388389390391392393394395396397398399400401402403404405406407408409410411412413414415416417418419420421422423424425426427428429430431432433434435436437438439440
373 2 $2,611.00 $2,198.25374 2 $2,618.00 $2,203.50375 2 $2,625.00 $2,208.75376 2 $2,632.00 $2,214.00377 2 $2,639.00 $2,219.25378 2 $2,646.00 $2,224.50379 2 $2,653.00 $2,229.75380 2 $2,660.00 $2,235.00381 2 $2,667.00 $2,240.25382 2 $2,674.00 $2,245.50383 2 $2,681.00 $2,250.75384 2 $2,688.00 $2,256.00385 2 $2,695.00 $2,261.25386 2 $2,702.00 $2,266.50387 2 $2,709.00 $2,271.75388 2 $2,716.00 $2,277.00389 2 $2,723.00 $2,282.25390 2 $2,730.00 $2,287.50391 2 $2,737.00 $2,292.75392 2 $2,744.00 $2,298.00393 2 $2,751.00 $2,303.25394 2 $2,758.00 $2,308.50395 2 $2,765.00 $2,313.75396 2 $2,772.00 $2,319.00397 2 $2,779.00 $2,324.25398 2 $2,786.00 $2,329.50399 2 $2,793.00 $2,334.75400 2 $2,800.00 $2,340.00401 2 $2,807.00 $2,345.25402 2 $2,814.00 $2,350.50403 2 $2,821.00 $2,355.75404 2 $2,828.00 $2,361.00405 2 $2,835.00 $2,366.25406 2 $2,842.00 $2,371.50407 2 $2,849.00 $2,376.75408 2 $2,856.00 $2,382.00409 2 $2,863.00 $2,387.25410 2 $2,870.00 $2,392.50411 2 $2,877.00 $2,397.75412 2 $2,884.00 $2,403.00413 2 $2,891.00 $2,408.25414 2 $2,898.00 $2,413.50415 2 $2,905.00 $2,418.75416 2 $2,912.00 $2,424.00417 2 $2,919.00 $2,429.25418 2 $2,926.00 $2,434.50419 2 $2,933.00 $2,439.75420 2 $2,940.00 $2,445.00421 2 $2,947.00 $2,450.25422 2 $2,954.00 $2,455.50423 2 $2,961.00 $2,460.75424 2 $2,968.00 $2,466.00425 2 $2,975.00 $2,471.25426 2 $2,982.00 $2,476.50427 2 $2,989.00 $2,481.75
A B C D E F G441442443444445446447448449450451452453454455456457458459460461462463464465466467468469470471472473474475476477478479480481482483484485486487488489490491492493494495
428 2 $2,996.00 $2,487.00429 2 $3,003.00 $2,492.25430 2 $3,010.00 $2,497.50431 2 $3,017.00 $2,502.75432 2 $3,024.00 $2,508.00433 2 $3,031.00 $2,513.25434 2 $3,038.00 $2,518.50435 2 $3,045.00 $2,523.75436 2 $3,052.00 $2,529.00437 2 $3,059.00 $2,534.25438 2 $3,066.00 $2,539.50439 2 $3,073.00 $2,544.75440 2 $3,080.00 $2,550.00441 2 $3,087.00 $2,555.25442 2 $3,094.00 $2,560.50443 2 $3,101.00 $2,565.75444 2 $3,108.00 $2,571.00445 2 $3,115.00 $2,576.25446 2 $3,122.00 $2,581.50447 2 $3,129.00 $2,586.75448 2 $3,136.00 $2,592.00449 2 $3,143.00 $2,597.25450 2 $3,150.00 $2,602.50451 2 $3,157.00 $2,607.75452 2 $3,164.00 $2,613.00453 2 $3,171.00 $2,618.25454 2 $3,178.00 $2,623.50455 2 $3,185.00 $2,628.75456 2 $3,192.00 $2,634.00457 2 $3,199.00 $2,639.25458 2 $3,206.00 $2,644.50459 2 $3,213.00 $2,649.75460 2 $3,220.00 $2,655.00461 2 $3,227.00 $2,660.25462 2 $3,234.00 $2,665.50463 2 $3,241.00 $2,670.75464 2 $3,248.00 $2,676.00465 2 $3,255.00 $2,681.25466 2 $3,262.00 $2,686.50467 2 $3,269.00 $2,691.75468 2 $3,276.00 $2,697.00469 2 $3,283.00 $2,702.25470 2 $3,290.00 $2,707.50471 2 $3,297.00 $2,712.75472 2 $3,304.00 $2,718.00473 2 $3,311.00 $2,723.25474 2 $3,318.00 $2,728.50475 2 $3,325.00 $2,733.75476 2 $3,332.00 $2,739.00477 2 $3,339.00 $2,744.25478 2 $3,346.00 $2,749.50479 2 $3,353.00 $2,754.75480 2 $3,360.00 $2,760.00481 2 $3,367.00 $2,765.25482 2 $3,374.00 $2,770.50
A B C D E F G496497498499500501502503504505506507508509510511512513514515516517518519520521522523524525526527528529530531532533534535536537538539540541542543544545546547548549550
483 2 $3,381.00 $2,775.75484 2 $3,388.00 $2,781.00485 2 $3,395.00 $2,786.25486 2 $3,402.00 $2,791.50487 2 $3,409.00 $2,796.75488 2 $3,416.00 $2,802.00489 2 $3,423.00 $2,807.25490 2 $3,430.00 $2,812.50491 2 $3,437.00 $2,817.75492 2 $3,444.00 $2,823.00493 2 $3,451.00 $2,828.25494 2 $3,458.00 $2,833.50495 2 $3,465.00 $2,838.75496 2 $3,472.00 $2,844.00497 2 $3,479.00 $2,849.25498 2 $3,486.00 $2,854.50499 2 $3,493.00 $2,859.75500 2 $3,500.00 $2,865.00501 2 $3,507.00 $2,870.25502 2 $3,514.00 $2,875.50503 2 $3,521.00 $2,880.75504 2 $3,528.00 $2,886.00505 2 $3,535.00 $2,891.25506 2 $3,542.00 $2,896.50507 2 $3,549.00 $2,901.75508 2 $3,556.00 $2,907.00509 2 $3,563.00 $2,912.25510 2 $3,570.00 $2,917.50511 2 $3,577.00 $2,922.75512 2 $3,584.00 $2,928.00513 2 $3,591.00 $2,933.25514 2 $3,598.00 $2,938.50515 2 $3,605.00 $2,943.75516 2 $3,612.00 $2,949.00517 2 $3,619.00 $2,954.25518 2 $3,626.00 $2,959.50519 2 $3,633.00 $2,964.75520 2 $3,640.00 $2,970.00521 2 $3,647.00 $2,975.25522 2 $3,654.00 $2,980.50523 2 $3,661.00 $2,985.75524 2 $3,668.00 $2,991.00525 2 $3,675.00 $2,996.25526 2 $3,682.00 $3,001.50527 2 $3,689.00 $3,006.75528 2 $3,696.00 $3,012.00529 2 $3,703.00 $3,017.25530 2 $3,710.00 $3,022.50531 2 $3,717.00 $3,027.75532 2 $3,724.00 $3,033.00533 2 $3,731.00 $3,038.25534 2 $3,738.00 $3,043.50535 2 $3,745.00 $3,048.75536 2 $3,752.00 $3,054.00537 2 $3,759.00 $3,059.25
A B C D E F G551552553554555556557558559560561562563564565566567568569570571572573574575576577578579580581582583584585586587588589590591592593594595596597598599600601602603604605
538 2 $3,766.00 $3,064.50539 2 $3,773.00 $3,069.75540 2 $3,780.00 $3,075.00541 2 $3,787.00 $3,080.25542 2 $3,794.00 $3,085.50543 2 $3,801.00 $3,090.75544 2 $3,808.00 $3,096.00545 2 $3,815.00 $3,101.25546 2 $3,822.00 $3,106.50547 2 $3,829.00 $3,111.75548 2 $3,836.00 $3,117.00549 2 $3,843.00 $3,122.25550 2 $3,850.00 $3,127.50551 2 $3,857.00 $3,132.75552 2 $3,864.00 $3,138.00553 2 $3,871.00 $3,143.25554 2 $3,878.00 $3,148.50555 2 $3,885.00 $3,153.75556 2 $3,892.00 $3,159.00557 2 $3,899.00 $3,164.25558 2 $3,906.00 $3,169.50559 2 $3,913.00 $3,174.75560 2 $3,920.00 $3,180.00561 2 $3,927.00 $3,185.25562 2 $3,934.00 $3,190.50563 2 $3,941.00 $3,195.75564 2 $3,948.00 $3,201.00565 2 $3,955.00 $3,206.25566 2 $3,962.00 $3,211.50567 2 $3,969.00 $3,216.75568 2 $3,976.00 $3,222.00569 2 $3,983.00 $3,227.25570 2 $3,990.00 $3,232.50571 2 $3,997.00 $3,237.75572 2 $4,004.00 $3,243.00573 2 $4,011.00 $3,248.25574 2 $4,018.00 $3,253.50575 2 $4,025.00 $3,258.75576 2 $4,032.00 $3,264.00577 2 $4,039.00 $3,269.25578 2 $4,046.00 $3,274.50579 2 $4,053.00 $3,279.75580 2 $4,060.00 $3,285.00581 2 $4,067.00 $3,290.25582 2 $4,074.00 $3,295.50583 2 $4,081.00 $3,300.75584 2 $4,088.00 $3,306.00585 2 $4,095.00 $3,311.25586 2 $4,102.00 $3,316.50587 2 $4,109.00 $3,321.75588 2 $4,116.00 $3,327.00589 2 $4,123.00 $3,332.25590 2 $4,130.00 $3,337.50591 2 $4,137.00 $3,342.75592 2 $4,144.00 $3,348.00
A B C D E F G606607608609610611612613614615616617618619620621622623624625626627628629630631632633634635636637638639640641642643644645646647648649650651652653654655656657658659660
593 2 $4,151.00 $3,353.25594 2 $4,158.00 $3,358.50595 2 $4,165.00 $3,363.75596 2 $4,172.00 $3,369.00597 2 $4,179.00 $3,374.25598 2 $4,186.00 $3,379.50599 2 $4,193.00 $3,384.75600 2 $4,200.00 $3,390.00
A B C D E F G661662663664665666667668
USE ENGINE LATHE IF Q=68 OR LESSUSE TURRET LATHE IF Q=69 TO 300
USE TURRET LATHE IF Q=301 TO 600
1 35 69 103137171205239273307341375409443477511545579$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
ENGINE LTURRET L
H123456789
10111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455
BRUTE FORCE TABLE OF COSTS FOR Q FROM 0 TO 600
H5657585960616263646566676869707172737475767778798081828384858687888990919293949596979899
100101102103104105106107108109110
PROBLEM 1.26
PRODUCTION CAPACITY = 300,000PERCENT OF CAPACITY NOW= 70.00%IF PERCENT OF CAPACITY= 90.00%SELLING PRICE/PALLET= $18.25VARIABLE COST/PALLET= $15.75FIXED COST= $550,000.00
a ANNUAL PROFIT= -$25,000.00 (OR LOSS OF $25,000.00)=300000*70%*(18.25-15.75)-550000
b LET X= BREAKEVEN SALES VOLUMEANNUAL PROFIT= $0.00 =X*(18.75-15.25)-550000X=BREAKEVEN SALES VOLUME 220,000 =550000/(18.25-15.75)
c ANNUAL PROFIT AT 90% CAP= $125,000.00 =300000*90%*(18.25-15.75)-550000
d LET Y= BREAKEVEN SALES VOLUME% REDUCTION IN FIXED COSTS= 40%ANNUAL PROFIT= $0.00 =Y*(18.25-15.75)-550000*(1-40%)Y=BREAKEVEN SALES VOLUME= 132,000 =550000*(1-40%)/(18.25-15.75)
A B C D123456789
10111213141516171819202122
PROBLEM 1.27
SEQUENCE 1 W1 W2 W3 W4 W5SCRAP RATE 3.00% 5.00% 5.00% 4.00% 4.00%
SEQUENCE 2 WA WB WCSCRAP RATE 5.00% 3.00% 3.00%
LOT SIZE= 1,000RAW MAT'L COST= $30.00
SEQUENCING COST A= $180.00 PER UNITSEQUENCING COST B= $210.00 PER UNIT
PERCENT GOOD FROM SEQ 1= 80.6792% =(1-0.03)*(1-0.05)*(1-0.05)*(1-0.04)*(1-0.04)PERCENT GOOD FROM SEQ 2= 89.3855% =(1-0.05)*(1-0.03)*(1-0.03)
SEQUENCE A TC= $210,000.00 =1000*(30+180)SEQUENCE A TC/GOOD UNIT= $260.29 =210000/(1000*80.6792%)
SEQUENCE B TC= $240,000.00 =1000*(30+210)SEQUENCE B TC/GOOD UNIT= $268.50 =240000/(1000*89.3855%)
SEQUENCE A HAS A LOWER TC/GOOD UNIT
SIDE NOTE! THESE SCRAP RATES ARE TERRIBLE. THIS COMPANY WILL NOT BE COMPETITIVE
A B C D E F G H123456789
10111213141516171819202122232425262728
PROBLEM 1.28
a CAR A CAR B CAR CFC/MONTH $550 $400 $800 MPG 25 19 33MAINT COST PER MI $0.20 $0.25 $0.15
MILES/MONTH= 4,000
COST OF FUEL/GAL= $3.25
COST/MONTH= $1,870.00 $2,084.21 $1,793.94 CALC FOR CAR A= =550+(4000/25)*3.25+4000*0.2
b AVG COST/MILE= $0.47 $0.52 $0.45 CALC FOR CAR C= =1793.94/4000
A B C D E F123456789
10111213141516
PROBLEM 1.29
TUNGSTEN COATEDCARBIDE CARBIDE CERAMICINSERT INSERT INSERT
TAYLOR'S TOOL LIFE EXPONENT = n 0.22 0.27 0.38
TOOL CHANGE TIME, MINUTES = 2 2 2
COST $/CUTTING EDGE = $0.40 $1.80 $3.00
COST OF LABOR AND OH $/MIN = $1.00 $1.00 $1.00
CONSTANT = K 150 250 550
a MIN UNIT COST TOTAL TOOL LIFE = Tc= 8.509 10.274 8.158CALCULATION 1 =(2+0.4/1)*((1/0.22)-1)CALCULATION 2 =(2+1.8/1)*((1/0.27)-1)CALCULATION 3 =(2+3/1)*((1/0.38)-1)
CUTTING SPEED = V= 93.652 133.281 247.721CALCULATION 1 =150/(8.509^0.22)CALCULATION 2 =250/(10.274^0.27)CALCULATION 3 =550/(8.158^0.38)
b BASED ON V, THE CERAMIC INSERT IS PREFERRED AT 247.721 FEET/MINUTE
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PROBLEM 1.30
MACHINE A MACHINE BTOTAL SETUP TIME IN HOURS = 4 6
CALCULATION =8*0.75MACHINING TIME PER UNIT = 0.50 0.55HOURLY WAGE RATES = $20.00 $18.00HOURLY OVERHEAD RATES = $30.00 $27.00
a ORDER SIZE = 100COST OF ORDER SIZE = $2,700.00 $2,745.00
CALCULATIONS =4*(20+30)+100*0.5*(20+30) =6*(18+27)+100*0.55*(18+27)
b ORDER SIZE = 500COST OF ORDER SIZE = $12,700.00 $12,645.00
CALCULATIONS =4*(20+30)+500*0.50*(20+30) =6*(18+27)+500*0.55*(18+27)
c LET X= BREAKEVEN ORDER QUANTITY
EQUATE THE COSTS OF MACHINES A AND B4*(20+30)+X*0.5*(20+30)=6*(18+27)+X*0.55*(18+27)
SOLVE FOR XX*(0.5*(20+30)-0.55*(18+27))=6*(18+27)-4*(20+30)
0.25*X= 70X= 280
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