rn Chrysler is considering a cost reduction program The suppliers must reduce the cost of the components
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Chrysler is considering a cost reduction program The suppliers must reduce the cost of the components that they furnish to Chrysler by 4% each year. (The total amount of savings would increase each year.) The Initial costs: • Program Setup: • Feasibility Study (completed six months ago) • Supplier Training: Chrysler is currently paying a total of $85.000,000 per year tor compononts purchased from the vendors who will be involved in this program. (Assume that, it the program is not approved, the annual cost of purchased components will remain constant at 585,000,000 per year.) The program has been designed as a five-year initiative, and Chrysler's MARR for such projects is 10% ( There will be annual operating expenses associated with the program for further training of vendors, updating internal documentation and so on Given the projected savings in purchased components, what would be the maximum annual operating expense for this program such that it is marginally justified? Assume that the EOY 1 cost for purchased components is $85,000.000 E Click the icon to view the interest and annuity table $13,500,000 1,600,000 6,500.000 discrete compounding when i= 10% per year Chrysler is considering a cost reduction program The suppliers must reduce the cost of the components that they furnish to Chrysler by 4% each year. (The total amount of savings would increase each year.) The Initial costs: • Program Setup: • Feasibility Study (completed six months ago) • Supplier Training: Chrysler is currently paying a total of $85.000,000 per year tor compononts purchased from the vendors who will be involved in this program. (Assume that, it the program is not approved, the annual cost of purchased components will remain constant at 585,000,000 per year.) The program has been designed as a five-year initiative, and Chrysler's MARR for such projects is 10% ( There will be annual operating expenses associated with the program for further training of vendors, updating internal documentation and so on Given the projected savings in purchased components, what would be the maximum annual operating expense for this program such that it is marginally justified? Assume that the EOY 1 cost for purchased components is $85,000.000 E Click the icon to view the interest and annuity table $13,500,000 1,600,000 6,500.000 discrete compounding when i= 10% per year
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Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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