In the midst of the growing panemic threat, high demand for body temperature scanner is witnessed in
Question:
In the midst of the growing panemic threat, high demand for body temperature scanner is witnessed in all the areas that deal with mass gatherings and people transit. Commercial spaces such as offices, laboratories, health care institutions, and hotels have ramped up their efforts of body temperature scanning,
The recent production expansion at ABC Technology – your primary competitor in the Body Temperature Scanner Market – poses a new concern to your company. The expansion was particularly for its popular Eagle-X model which is known for its high performance and reliability.
ABC Technology publicly announced that it has invested “half a million dollars” to double the output rate of its bottleneck process in order to catch up with the strong market demand driven by pandemic. The production process for Eagle-X can be described by the diagram below:
Material Prep -> Initial Assembly -> Laser welding -> Cleaning -> Testing
Your company is certain that prior to the expansion, ABC Technology has only one machine at each station. Machine used at each station is also similar to what your firm currently uses for a comparable product, so you have a good estimate on each machine’s capability in the process. Table below is a summary of all relevant information on the machines prior to the expansion:
Station | Time or Output Rate |
Material Preparation | 4 minutes per unit |
Initial Assembly | 3 units per hour |
Laser Welding | 24 minutes per unit |
Cleaning | 2 units per hour |
Testing | 7.5 minutes per unit |
For simplicity, assume the followings:
ABC Technology has infinite amount of raw materials; process is always in steady state and stable
Production runs 8 hours a day, 25 days a month
All units of Eagle-X produced can be sold
Cash flows compound monthly to perpetuity, annual cost of capital is 18%
Suppose that ABC Technology’s expansion was guided by a simple economic analysis of a process, what can be said about the “profit per unit” ABC Technology is making from selling each unit of Eagle-X?
Accounting for Governmental and Nonprofit Entities
ISBN: 978-0078110931
16th Edition
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus