Question 3 (15 points) You have to decide which of two machine- Automatic or Manual,...
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Question 3 (15 points) You have to decide which of two machine- Automatic or Manual, to purchase. The information about the machines is the following: W-(15 marks) Automatic Machine- Fixed csts (Interest, insurance, maintenance, etc.) total $100,000. The labour and material costs for manufacturing a shaft, are $10.2/Unit and $15.6/Unit, respectively. Manual Machine- Fixed costs (Interest, insurance, maintenance, etc.) total $70,000. Tire labour and material costs for manufacturing the shaft, are $16.0/Unit and $18.5/Unit. a. What is the point of indifference (break-even-point) for the two machines? (5 marks) b. If the demand for the 500mm Block is 3800 units/year, which machine should you buy? Why? (2 marks) Engineering Services Inc. offers to sell you the block for $65.0/Unit for any quantity you require, c. For what level of demand would you rather buy the block, instead of purchasing any of the above machines and manufacture the shaft in house? (5 marks) d. Sum-up your choice for alternatives, according to the demand quantity List the quantity range for each alternative (Buy, Purchase Manual, Purchase Automatic)
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