PROBLEM A machine that costs $ 40,000 has a useful life of 8 years and it is...

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PROBLEM
A machine that costs $ 40,000 has a useful life of 8 years andit is estimated that the residual value at the end of its usefullife is $ 5,000. This machine, which will be used to make pieces ofcomplex geometry and will have an annual operation and maintenancecost of $ 8,000. The operator of this machine receives $ 15.00 perhour and the machine consumes power at a rate of $ 1.15 per hour.It has also been estimated that each piece needs an average of 48minutes of machine time to be manufactured.
Note: Although the operator must remain with the machine foras long as the machine is processing parts, he or she can performother functions the rest of the time.
1. If the annual production has been forecast close to twothousand pieces (2,000), calculate the total unit cost (per piece)considering the value of the money over time if the company uses anannual MARR of 15%.
2. If the pieces can be sold for $ 30 each and we can presumethat this price will remain fixed for the length of the studyperiod (8 years),
a) Determine the number of pieces that must be produced andsold so that the company that invests in this alternative neitherwins nor loses money.
b) under the presumption of an annual volume of 2,000 pieces,determine the number of years that must elapse before the companyrecovers its investment if we consider the value of money over time("discounted payback").

Answer & Explanation Solved by verified expert

3.8 Ratings (405 Votes)

Annual Depreciation4000050008 4375 Annual Operations and maintenance 8000 Annual Operation time 20004860 Hour 1600 Cost of Operator15001600 24000 Cost of power1151600 1840 Total Annual Cost 39815 Present Value PV of Cost Cost1iN iDiscount RateMARR15015 NYear of Cost incurred N Year 1 2 3 4 5 6 7 8 A Cost 39815 See Answer

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Transcribed Image Text

PROBLEMA machine that costs $ 40,000 has a useful life of 8 years andit is estimated that the residual value at the end of its usefullife is $ 5,000. This machine, which will be used to make pieces ofcomplex geometry and will have an annual operation and maintenancecost of $ 8,000. The operator of this machine receives $ 15.00 perhour and the machine consumes power at a rate of $ 1.15 per hour.It has also been estimated that each piece needs an average of 48minutes of machine time to be manufactured.Note: Although the operator must remain with the machine foras long as the machine is processing parts, he or she can performother functions the rest of the time.1. If the annual production has been forecast close to twothousand pieces (2,000), calculate the total unit cost (per piece)considering the value of the money over time if the company uses anannual MARR of 15%.2. If the pieces can be sold for $ 30 each and we can presumethat this price will remain fixed for the length of the studyperiod (8 years),a) Determine the number of pieces that must be produced andsold so that the company that invests in this alternative neitherwins nor loses money.b) under the presumption of an annual volume of 2,000 pieces,determine the number of years that must elapse before the companyrecovers its investment if we consider the value of money over time("discounted payback").