A machine that produces a certain piece must be turned off by the operator after each piece is completed. Themachine "coasts" for 15 seconds after it is turned off, thus preventing the operator from removing the piecequickly before producing the next piece. An engineer has suggested installing a brake that would reduce thecoasting time to 3 seconds.The machine produces 50,000 pieces a year. The time to produce one piece is 1 minute 45 seconds, excludingcoasting time. The operator earns $12 an hour and direct costs for operation are $2 an hour. The direct costsare incurred whenever the operator has to work. The brake will require servicing every 594 hours of machineoperation. It will take the operator 30 minutes to perform the necessary maintenance and will require $42 inparts and materials. The brake is expected to last 7,500 hours of operation (with proper maintenance) and willhave no salvage value.How much could be spent for the brake if the Minimum Attractive Rate of Return is 10% compoundedannually?Enter your answer in this format: 1234.56

Present SystemWith BrakeSaving in HoursTime to produce one unit in seconds105105Coasting time in…

Answered: A machine that produces a certain piece…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 13E

See similar textbooks

Similar questions

A machine that produces a certain piece must be turned off by the operator after each piece is completed. The machine "coasts" for 15 seconds after it is turned off, thus preventing the operator from removing the piece quickly before producing the next piece. An engineer has suggested installing a brake that would reduce the coasting time to 3 seconds. The machine produces 50,000 pieces a year. The time to produce one piece is 1 minute 45 seconds, excluding coastint time. The operator earns $13 an hour and direct costs for operation are $2 an hour. The direct costs are incurred whenever the operator has to work. The brake will require servicing every 587 hours of operation. It will take the operator 30 minutes to perform the necessary maintenance and will require $60 in parts and material. The brake is expected to last 7,500 hours of operation (with proper maintenance) and will have no salvage value. How much could be spent for the brake if the Minimum Attractive Rate of Return is 10%…
An assembly operation at a software company currently requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation, and the robot will cost $200,000 with no MV at the end of its 10-year life. The robot, if acquired, will be depreciated using SL depreciation to a terminal BV of zero after 10 years. Maintenance and operation expenses of the robot are estimated to be $64,000 per year. Thecompany has an effective income tax rate of 40%. Invested capital must earn at least 8% after income taxes are taken into account. Solve, a. Use the IRR method to determine if the robot is a justifiable investment. b.If MACRS (seven-year recovery period) had been used in Part (a), would the after-tax IRR be lower or higher than your answer to Part (a)?
Smart Manufacturing Company is planning to reduce its labor costs by automating a critical task that is currently performed manually. The automation requires the installation of a new machine. The cost to purchase and install a new machine is $15,000. The installation of machine can reduce annual labor cost by $4,200. The life of the machine is 15 years. The salvage value of the machine after fifteen years will be zero. The required rate of return of Smart Manufacturing Company is 25%. Should Smart Manufacturing Company purchase the machine?
An assembly operation at a software company now requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation. The robot will cost $200,000 and will have no market value at the end of the 10-year study period. Maintenance and operation expenses of the robot are estimated to be $64,000 per year. Invested capital must earn at least 12% per year. Use the IRR method to determine if the robot is a justifiable investment.
It is planning to reduce its labor costs by automating a critical task that is currently performed manually.The cost to purchase a new machine is $15,000. The installation of machine can reduce annual labor cost by$4,200. The life of the machine is 15 years. The salvage value of the machine after fifteen years will be zero.The required rate of return of Smart Manufacturing Company is 25%.
Bramble Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $88,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 11,000 frames per year, generating a total contribution margin of $85,500. Martson Molders currently sells a molding machine that will allow Bramble Pix to increase production and sales to 15,000 frames per year. The machine, which has a ten-year life, sells for $131,000 and would cost $12,000 per year to operate. Bramble Pix's current machine costs only $8,000 per year to operate. If Bramble Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $19,500 at the end of its ten-year life.…
ABC Manufacturing Company is planning to reduce its labor costs by automating a critical task that is currently performed manually. The automation requires the installation of a new machine. The cost to purchase and install a new machine is 15,000. The installation of machine can reduce annual labor cost by 4,200. The life of the machine is 15 years. The salvage value of the machine after fifteen years will be zero. The required rate of return of Smart Manufacturing Company is 25%. Should Smart Manufacturing Company purchase the machine?
Concord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 9.000 frames per year, generating a total contribution margin of $92,500. Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per year. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $19,900 at the end of its ten-year life. Concord…
Higgins Machine Tools, Inc. is currently manufacturing one of its products on a hydraulic stamping press machine. The unit cost of the product is $16, and in the past year 4,000 units were produced and sold for $24 each. It is expected that the future demand of the product and the unit price will remain steady at 4,000 units per year and $24 per unit, respectively.Defender: The machine has a remaining useful life of three years and could be sold on the open market now for $8,000. Three years from now, thethe machine is expected to have a salvage value of $1,800.Challenger: A new machine would cost $40,000, and the unit manufacturing cost on the new machine is projected to be $14. The new machine has an expected economic life of five years and an expected salvage of $8,000. The appropriate MARR is 10%. The firm does not expect a significant improvement in the machine's technology to occur, and it needs the service of either machine for an indefinite period of time.(a) Compute the cash…
A plant engineer wishes to know which of two types of lightbulbs should be used to light a warehouse. The bulbs that are currently used cost $49.40 per bulb and last 14,500 hours before burning out. The new bulb (at $63.3 per bulb) provides the same amount of light and consumes the same amount of energy, but it lasts twice as long. The labor cost to change a bulb is $16.00. The lights are on 20 hours a day, 365 days a year. (Assume that the firm's marginal tax rate is 25%.) If the firm's MARR is 16%, what is the maximum price (per bulb) the engineer should be willing to pay to switch to the new bulb? Round the service life of the old bulb to the nearest whole number. Click the icon to view the interest factors for discrete compounding when /= 16% per year. The maximum price per new bulb the engineer should be willing to pay is $ (Round to one decimal place.)
Whispering Winds Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $108,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $8,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 15,000 frames per year, generating a total contribution margin of $102,000.Martson Molders currently sells a molding machine that will allow Whispering Winds Pix to increase production and sales to 20,000frames per year. The machine, which has a ten-year life, sells for $143,000 and would cost $15,000 per year to operate. Whispering Winds Pix’s current machine costs only $8,000 per year to operate. If Whispering Winds Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $20,000 at…
Whispering Winds Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $ 108,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $ 8,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 15,000 frames per year, generating a total contribution margin of $ 102,000. Martson Molders currently sells a molding machine that will allow Whispering Winds Pix to increase production and sales to 20,000 frames per year. The machine, which has a ten-year life, sells for $ 143,000 and would cost $ 15,000 per year to operate. Whispering Winds Pix's current machine costs only $ 8,000 per year to operate. If Whispering Winds Pix purchases the new machine, the old machine could be sold at its book value of $ 5,000. The new machine is expected to have a salvage value of $…

SEE MORE QUESTIONS

Recommended textbooks for you

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning