In Example 1.11, it is noted that an order of 68.57 units will have the same total cost, regardless of machine used.

a. Show the complete calculation to determine this breakeven value of 68.57 units.

b. For 68 units or less, per order, which machine is more economical?

c. For an order of 400 units, how much will be saved by using the more economically attractive lathe?

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EXAMPLE 1.11 Choosing Manufacturing Equipment A particular metal component part can be machined on either an engine lathe or a turret lathe. In either case, the machines are not used exclusively for this particular part. Rather, parts are produced in batches according to a customer's order. If the part is produced on the turret lathe, a setup of the machine is required each time a customer's order is processed. The setup is required only once per order if the order size is less than or equal to 300 units. If the order size is greater than 300 units, then a setup is required every 300 units. The material cost per unit is the same regardless of the machine used. Relevant time and cost data for the engine lathe and the turret lathe are given below. Which machine should be used for order sizes of 25, 100, and 500 units? Parameter Engine Lathe Turret Lathe Setup time Negligible 2 hours/order Direct labor and machine time 10 minutes/part 5 minutes/part Direct labor rate $15/hr Machine rate $24/hr Cutting tool cost $0.50/part $24/hr $36/hr $0.25/part