Problem NO: 13

A 12-station transfer line was designed to operate with an ideal production rate = 50 parts/hour.\nHowever, the line does not achieve this rate, since

A 12-station transfer line was designed to operate with an ideal production rate = 50 parts/hour.

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However, the line does not achieve this rate, since the line efficiency = 0.60. It costs $75/hour to

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operate the line, exclusive of materials. The line operates 4000 hours per year. A computer

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monitoring system has been proposed that will cost $25,000 (installed) and will reduce downtime

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on the line by 25%. If the value added per unit produced = $4.00, will the computer system pay for

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itself within one year of operation? Use expected increase in revenues resulting from the computer

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system as the criterion. Ignore material costs in your calculations.

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