# 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 \$ 60,000 B \$ 50,000 C \$ 60,000 Product forecasts and processing times on the machines are as follows: PROCCESSING TIME PER UNIT (minutes) Product Annual Demand A B C 1 16,000 3 4 4 2 10,000 6 5 1 3 15,000 1 3 6 4 17,000 5 3 4 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 10 hours a day, 240 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 B C Number of each machine needed and total purchasing cost A \$ B \$ C \$ b. Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of \$13 each, B machines have an hourly operating cost of \$15 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 B C

) Calculate processing time needed by each machine.
ie, Annual Demand * Processing Time
Product A B C
1 48000 64000 64000
2 60000 50000 10000
3 15000 45000 90000
4 85000 51000 68000
TOTAL 208000 210000 232000
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Given: 10 operating hours per day and 240 operating days per year.
10 hours per day * 60 minutes per hour * 240 days per year = 144,000 minutes per year available time per machine.
Machine A:
No. of machine A needed = 208,000 minutes per year required/ 144,000 minutes per year available =1.44 ->rounded up to 2
No. of machine A needed * \$60,000(Cost of Machine A) = \$120,000 Total purchasing cost of Machine A
Machine B:
No. of machine B needed = 210,000 minutes per year required/ 144,000 minutes per year available =1.45 ->rounded up 2
No. of machine B needed * \$50,000 (Cost of Machine B) = \$100,000 Total purchasing cost of Machine B
Machine C:
No. of machine C needed = 232,000 minutes per year required/ 144,000 minutes per year available = 1.61 ->rounded up 2
No. of machine C needed * \$50,000 (Cost of Machine C) = \$100,000 Total purchasing cost of Machine C
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We will buy 2 B’s as the purchasing cost is less compared to other machines.
b)
Total operating cost = purchase cost + operating cost; and, convert processing minutes in a into processing hours
Machine A operating cost = 120,000+( 208,000 / 60 ) * \$13 per hour = 165,066
Machine B operating cost = 100,000+( 210,000 / 60 ) * \$15 per hour = 152,500
Machine C operating cost = 100,000+( 232,000 / 60 ) * \$10 per hour = 138,666
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