Question 4 A machine capable of delivering 100 hp has been c

Question 4: A machine capable of delivering 100 hp has been considered for the production of a part. Calculate the profit that this machine generates per day assuming the following: Material cost to produce one part $20 Production rate (parts/hour) 300 7 S50 S20 $10 5% S0.15 80% Hours available for production per day Selling price per defect-free part Operators cost per hour Overhead costs per hour Percent parts rejected Electric power cost per kw-hr Machine efficiency Note: 1 hp= 0.746 kw

Solution

Profit = Sales - Cost

Sales = Production x Sale price

= [(Number of parts per hour x Efficiency of machine x Number of hours worked) - 5%] x $50

= [(300 x 80% x 7) - 5%] x $50

= 1596 x 50 = $79,800

Cost:

Material Cost = 300 x 80% x $20 = $4,800

Operator cost = $20 x 7 =$140

Overhead cost = $10 x 7 = $70

Electricity cost = $0.15 x 7 = $1.05

Total Cost = $5011.05

Profit per day of machine = $79800 - $5011.05 = $74,789.