MS 303 QUIZ 1_solution

# MS 303 QUIZ 1_solution - = \$ 860 Drilling 3 Total Cost 150...

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MS 303 QUIZ 1 Question 1: A.B.C Manufacturing Company wants to change old drilling machine with a better one, so it conducted market research. According to the results of the research, the company will decide to purchase the most economical drilling machine among the three alternatives to produce 150 units of product on this machine. The rates and costs of these machines are as follows: Drilling 1 Drilling 2 Drilling 3 Production Rate 4 parts/hour 6 parts/hour 8 parts/hour Machine Charge \$5/hour \$6/hour \$8/hour Setup Charge (Labor) \$40 \$35 \$70 Operating Charge (Labor) \$19/hour \$15/hour \$20/hour Overhead Cost \$10/hour \$12/hour \$14/hour Decide which machine is the most economical one for A.B.C, by comparing the cost of producing 150 units with each type of machine? Soluiton: Drilling 1: Total Cost / 150 Units: \$40 + [(150 units)/(4 units/hr)]( \$5/hr + \$19/hr + \$10/hr) = \$ 1.315 Drilling 2: Total Cost / 150 Units: \$35 + [(150 units)/(6 units/hr)] ( \$6/hr + \$15/hr + \$12/hr)

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Unformatted text preview: = \$ 860 Drilling 3: Total Cost / 150 Units: \$70 + [(150 units)/(8 units/hr)] ( \$8/hr + \$20/hr + \$14/hr) = \$ 857,5 Result : Since Drilling 3 gives the total least cost for 150 units of products, the company has to decide to purchase this machine. Question 2: The contract of Consultant The current production capacity: 3000 unit/month The price of product is a function of demand which is described by P=120-0.01D, where D is the monthly demand. In current market conditions, the company can sell what it produces. The total variable cost is \$30 per unit. The set up (fixed) cost is \$7000. The company can hire a consultant who can increase the production capacity at a rate of %4 per month. To maximize the monthly profit of the company, what should be the length of contract with the consultant? Solution Profit=D(120-0.01D)-30D-7000 month unit D D / 4500 02 . 90 30 02 . 120 D profit = = =--= ∂ ∂ 34 . 10 04 . 1 * 3000 4500 = = n n...
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## This note was uploaded on 03/16/2012 for the course FENS 101 taught by Professor Selçukerdem during the Fall '12 term at Sabancı University.

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MS 303 QUIZ 1_solution - = \$ 860 Drilling 3 Total Cost 150...

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