As a production engineer working for an auto maker, you have been tasked with determining the...

 

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As a production engineer working for an auto maker, you have been tasked with determining the best way to acquire the plastic instrument panel of the most recent vehicle model. Specifically, you must advise upper management as to whether it is best to produce the panel in-house or to outsource its fabrication to a supplier. The instrument panel is to be manufactured by injection molding. Although there is sufficient expertise in your company to produce the panel in-house, an injection molding machine would need to be purchased and a manufacturing area setup specifically for thispurpose at a total cost (purchase and installation) of $400,000. In addition, the machine would entail monthly_operating and maintenance costs of $1,000. Based on your estimates, the total cost of materials and labour to produce the instrument panel for one vehicle in-house would be $60. The production process would inevitably lead to defective panels being produced and needing to be thrown away (at a cost of $60 each). Based on information acquired from the injection moldingindustry, the rate of occurrence of defects can be expected to behave as a normal distribution withan average of 3% standard deviation of 0.5%. If the instrument panels are outsourced, the only expenditures are the purchase cost per panel as provided by prospective suppliers. Based on received quotes, these costs would vary with the production level as indicated in Table 3. Table 3 – Cost per outsourced instrument panel based on production level. Production level per month (units) Cost per panel 1 to 24 $150 25 to 49 $140 50 to 99 $125 100 to 249 $115 250 to 499 $105 500 to 999 $85 1,000 to 1,999 $75 2,000 and 2,999 $70 3,000 and over $50 Based on sales projections for the vehicle, you estimate that the monthly production level willbe at least 300 units, at most 5,500 units and most likely 2,800 units. Your company's MARR is 10% compounded monthly_and your analysis is to be based on a 5 years study period. To simplify your analysis, you may assume that all costs occur at the end of their respective months. All calculations must be performed in MS Excel. III.Based on a nominal production level of 2,800 units, determine the cost per instrument panel based on outsourcing the production. Your worksheet should usea lookup table to obtain the appropriate cost from the data in Table 3 (i.e., the cost per panel should change automatically according to the specified nominal production level). (2 points) As a production engineer working for an auto maker, you have been tasked with determining the best way to acquire the plastic instrument panel of the most recent vehicle model. Specifically, you must advise upper management as to whether it is best to produce the panel in-house or to outsource its fabrication to a supplier. The instrument panel is to be manufactured by injection molding. Although there is sufficient expertise in your company to produce the panel in-house, an injection molding machine would need to be purchased and a manufacturing area setup specifically for thispurpose at a total cost (purchase and installation) of $400,000. In addition, the machine would entail monthly_operating and maintenance costs of $1,000. Based on your estimates, the total cost of materials and labour to produce the instrument panel for one vehicle in-house would be $60. The production process would inevitably lead to defective panels being produced and needing to be thrown away (at a cost of $60 each). Based on information acquired from the injection moldingindustry, the rate of occurrence of defects can be expected to behave as a normal distribution withan average of 3% standard deviation of 0.5%. If the instrument panels are outsourced, the only expenditures are the purchase cost per panel as provided by prospective suppliers. Based on received quotes, these costs would vary with the production level as indicated in Table 3. Table 3 – Cost per outsourced instrument panel based on production level. Production level per month (units) Cost per panel 1 to 24 $150 25 to 49 $140 50 to 99 $125 100 to 249 $115 250 to 499 $105 500 to 999 $85 1,000 to 1,999 $75 2,000 and 2,999 $70 3,000 and over $50 Based on sales projections for the vehicle, you estimate that the monthly production level willbe at least 300 units, at most 5,500 units and most likely 2,800 units. Your company's MARR is 10% compounded monthly_and your analysis is to be based on a 5 years study period. To simplify your analysis, you may assume that all costs occur at the end of their respective months. All calculations must be performed in MS Excel. III.Based on a nominal production level of 2,800 units, determine the cost per instrument panel based on outsourcing the production. Your worksheet should usea lookup table to obtain the appropriate cost from the data in Table 3 (i.e., the cost per panel should change automatically according to the specified nominal production level). (2 points)

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