The process engineer at Strowbridge Metal works has the choi

The process engineer at Strowbridge Metal works has the choice of machining a particular part on either of two machines. Orders for this part re received regularly, but the order size varies.. When the order is processed on machine A, four sequential set up operations of 1 hour each are required.Once set up, the machining time is 0.50 hours per unit. When the order is processed on machine B, eight sequential set up operations of 0.75 hours each are required. Once set up, the machining time per unit is 0.55 hours. The hourly wage raes for operators are $20 and $18 for machine A and machine B, respectively. The hourly overhead rates, including set up time, are $30 and $27 for machine A and Machine B, respectively. a) Which machine is prefwrred if the order size is 100 units? b) Which machine is preffered if the order size is 500 units c) What is the breakeven order size

Solution

a) Econoimic Order Quantity = (2 *F*D /C)^1/2

A=2*$30*100 units/ $20^1/2

=17 units

B=2*$27*100 units/ $18^1/2

=17 units

Both A and B are equal in size but B is less cost than A, .

So B preferred for the order size 100 units

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b)Econoimic Order Quantity = (2 *F*D /C)^1/2

A=2*$30*500 units/ $20^1/2

=39 units

B=2*$27*500 units/ $18^1/2

=39units

Again both are equal. this time we can eloborate

A have four equential set up operations of one hour required. per unit is 0.50 minutes=30 minutes per unit * 500 units=15,000 minutes/60=250 hours * $20=$5,000

B have eight equential set up operations of 0.55 hours each=33 minutes per unit * 500=16,500 minues is required=16,500 /60 minutes=275 hours * $18=$4950 .

AGain B is preferred for the order size of 500 unit.

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c)A = 100 units * $30 / 100 * $20

=$3,000 / $2,000

=1.5

B)100* =$27 / 100 * 18

=2700/ 1800

=1.5