A small feed mill company is evaluating two alternatives: the purchase of an automatic feed machine and a manual feed machine for a finishing process. The auto-feed machine has an initial cost of Php23,000, an estimated salvage value of Php4,000, and a predicted life of 10 years. One person will operate the machine at a rate of Php24 per hour. The expected output is 8 tons per hour. Annual maintenance and operating cost is expected to be Php3,500. The alternative manual feed machine has a first cost of Php8,000, no expected salvage value, a 5-year life, and an output of 6 tons per hour. However, three workers will be required at Php12 per hour each. The machine will have an annual maintenance and operation cost of Php1,500. All projects are expected to generate a return of 10% per year. How many tons per year must be finished in order to justify the higher purchase cost of the auto-feed machine
A small feed mill company is evaluating two alternatives: the purchase of an automatic feed machine and a manual feed machine for a finishing process. The auto-feed machine has an initial cost of Php23,000, an estimated salvage value of Php4,000, and a predicted life of 10 years. One person will operate the machine at a rate of Php24 per hour. The expected output is 8 tons per hour. Annual maintenance and operating cost is expected to be Php3,500.
The alternative manual feed machine has a first cost of Php8,000, no expected salvage value, a 5-year life, and an output of 6 tons per hour. However, three workers will be required at Php12 per hour each. The machine will have an annual maintenance and operation cost of Php1,500. All projects are expected to generate a return of 10% per year. How many tons per year must be finished in order to justify the higher purchase cost of the auto-feed machine?
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