Operations Management

Problem 5-11

A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows:
Machine     Cost
A $ 80,000
B $ 70,000
C $ 40,000

Product forecasts and processing times on the machines are as follows:
Product Annual
1 29,000 4 5 6
2 21,000 4 5 5
3 29,000 5 6 2
4 11,000 4 4 1

a. Assume that only purchasing costs are being considered. Compute the total processing time required for each machine type to meet demand, how many of each machine type would be needed, and the resulting total purchasing cost for each machine type.  The machines will operate 8 hours a day, 230 days a year. (Enter total processing times as whole numbers.  Round up machine quantities to the next higher whole number.  Compute total purchasing costs using these rounded machine quantities.  Enter the resulting total purchasing cost as a whole number.  Omit the “$” sign.)
  Total processing time in minutes per machine:
  A 389,000 correct
  B 468,000 correct
  C 348,000 correct

  Number of each machine needed and total purchasing cost
  A correct $ 281,884 incorrect
  B incorrect $ 296,739 incorrect
  C incorrect $ 126,087 incorrect

b. Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $12 each, B machines have an hourly operating cost of $14 each, and C machines have an hourly operating cost of $10 each.  What would be the total cost associated with each machine option, including both the initial purchasing cost and the annual operating cost incurred to satisfy demand? (Use rounded machine quantities from Part a.  Do not round any other intermediate calculations.  Round your final answers to the nearest whole number.  Omit the “$” sign.)
  Total cost for each machine
  A n/r incorrect
  B n/r incorrect
  C n/r incorrect

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