A company must decide which type of machine to buy, and how many units of that type, given the

following inform
type cost
1 $10,000
2 14,000
PROCESSING TIME
Annual PER UNIT (MINUTES)
Product Demand 1 2
1 12,000 4 6
2 10,000 9 9
3 18,000 5 3

a. How many machines of each type would be required to handle demand if the machines will operate 8 hours a da
cushion in processing time would result for each?
Using Machine Type 1 250 X 8 X 60 =

Processing Requirement using Machine Type 1 :

Product 001 12,000 X 4 = 48,000 minutes
Product 002 10,000 X 9 = 90,000 minutes
Product 003 18,000 X 5 = 90,000 minutes
TOTAL 228,000 minutes

Number of Machine Type 1 needed : 1.9 = 2 Machines

Capacity 2 X 120,000 = 240,000 minutes
Capacity Cushion 240,000 - 228,000 = 12,000 minutes

Using Machine Type 2 250 X 8 X 60 =

Processing Requirements using Machine Type 2:

Product 001 12,000 X 6 = 72,000 minutes
Product 002 10,000 X 9 = 90,000 minutes
Product 003 18,000 X 3 = 54,000 minutes
TOTAL 216,000 minutes

Number of Machine Type 2 needed 1.8 = 2 Machines

Capacity 2 X 120,000 = 240,000 minutes
Capacity Cushion 240,000 - 216,000 = 24,000 minutes

b. With high certainty of annual demand, which type of machine would be chosen if that was an important conside
be chosen?
Answer : If we faced high uncertainty of annual demand, we would select the type of machine with the higher cap
of annual demand, we would select the type of machine with the lower capacity cushion (Machine Type
c. If purchasing and operating costs are taken into account, which type of machine would minimize total costs, give
$5/hr for type 2.
Given : Operating Cost $6 for type 1 & $5/hour for type 2
Purchase Cost for Machine Type 1 2.00 X $10,000 = $20,000
Total Operating Time for Machine Type 1 228000 minutes = 3,800 minutes
Total Operating Cost 3,800 X 6 = $ 22,800
Total Cost $20,000 + $22,800 = $42,800

Purchase Cost for Machine Type 2 2 X $14,000 = $28,000

Total Operating Time for Machine Type 2 216,000 minutes = 3,600 minutes
Total Operating Cost 3,600 X $5 = $18,000
Total Cost $28,000 + $18,000 = $46,000

Conclusion : Machine Type 1 would minimize total cost.

 pe, given the following information.

hines will operate 8 hours a day, 250 days a year, and what annual capacity

120,000 minutes per year

120,000 minutes per year

hat was an important consideration? With low certainty, which type of machine would

of machine with the higher capacity cushion (Machine Type 2). If we faced low uncertainty
pacity cushion (Machine Type 1)
ould minimize total costs, given your answer for part a? Operating cost are $4/hr for type 1 and