Question: The following data refer to two different processes that are being considered for the manufacture of a new design of Tonka Mighty Dump Truck

The following data refer to two different processes that are being considered for the manufacture of a new

The following data refer to two different processes that are being considered for the manufacture of a new design of "Tonka Mighty Dump Truck" (a popular children's toy) in a factory to be located in a new industrial park in El Paso, TX. METHOD A Initial cost of equipment and assembly of equipment = $480,000 Labor time for assembly of one toy: 8 minutes Labor cost: $12.00 per hour Material and tooling cost: $5.25 per toy METHOD B Initial cost of equipment and assembly of equipment = $750,000 Labor time for assembly of one toy: 4 minutes Labor cost: $12.00 per hour Material and tooling cost: $5.25 per toy FOR EITHER METHOD A OR METHOD B * 15 production hours per day for 300 days per year * Interest rate on loan from a commercial bank to buy the equipment and pay for its assembly in the factory: 9% per year * Period of analysis: 5 years By calculating the TOTAL cost of manufacture PER TOY using the two methods. comment on their relative economics.

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SOLUTION Based on the information provided we can calculate the total cost of manufacture per toy using Method A and Method B Method A Initial investment 480000 Labor cost per toy 525 Total cost per t... View full answer

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