6. Machine A and Machine B are being considered for the production of a part of a product. The impor- tant differences between the machines are: Machine A Machine B Production rate Hours available for production Rejection rate 100 parts/hr 130 parts/hr 6 hrs/day 10 % 7 hrs/day 3% The material cost is $6.00 per part, the operator cost is $15.00 per hour, and the variable overhead cost is $5.00 per hour. All defect-free parts produced can be sold for $12 each, and the rejected parts have no value. • Assume that the daily demand for this part is large enough that all defect-free parts can be sold. Which machine should be selected? • What should the rejection rate be for Machine B to be as profitable as Machine A?
6. Machine A and Machine B are being considered for the production of a part of a product. The impor- tant differences between the machines are: Machine A Machine B Production rate Hours available for production Rejection rate 100 parts/hr 130 parts/hr 6 hrs/day 10 % 7 hrs/day 3% The material cost is $6.00 per part, the operator cost is $15.00 per hour, and the variable overhead cost is $5.00 per hour. All defect-free parts produced can be sold for $12 each, and the rejected parts have no value. • Assume that the daily demand for this part is large enough that all defect-free parts can be sold. Which machine should be selected? • What should the rejection rate be for Machine B to be as profitable as Machine A?
Chapter6: Proudction Costs
Section: Chapter Questions
Problem 8SQP
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