Moin Ahmed is a process engineer at Xyon Technologies, which manufactures power supply systems. Moin notices that one of the steps involved requires 4.2 hours of setup per batch. The firm currently estimates setup costs to be $65 per hour.
Moin believes that the firm should acquire quick-change dies that could be preloaded when the current job is still running. These dies, specific to each product, cost $5,000 each and would last two years. With the dies, setup times would be reduced to 5 minutes per changeover. Moin argues that acquiring the dies makes sense from a strategic perspective.
The dies would allow the company to reduce batch size from 750 units per batch to a much smaller number. This reduction would reduce inventories, thereby adding to the company’s flexibility in matching demand with supply. He also thinks that the change would improve product quality because it might be easier to detect errors in a smaller batch.

Required:
a. Compute the cost savings from acquiring the quick-change die for a product with an annual volume of 6,000 units and for a product with an annual volume of 7,500 units.
b. Considering the qualitative benefits, what do you recommend?