You may use MS Excel Software to do the work. However, you will only submit a DOC or PDF to Canvas. You may work in groups. However, work must be individual and original. HOMEWORK: Answer the questions in the following problem. The question is also included in the handout package . Norwegian Salmon Processing Facility, Trondheim NorSal Trondheim operates a salmon processing facility where fish Pedersen, is skeptical about undergoing the plant modernization. are purchased from local sources along the North Sea, processed at The older equipment, he argues, is already paid for, and new equip- the facility, and sold to customers for distribution. The plant man- ment would cost $10,000 per week. This cost is comprised of both ager, Inger Hansen, is contemplating a plant modernization to principal and interest, and includes manufacturer installation of the upgrade the technology in the plant. While the plant performs well equipment. The controller, Maret Karlsen, cautions that all deci- enough now, modernizing equipment would allow the plant to sions related to costs should be included in the analysis and that increase capacity per hour, which is particularly advantageous because the energy consumption would be different, this must also because the factory has enough demand to cover the additional be accounted for in the decision. Energy costs are presently $10 per capacity. Currently, the plant operates five days a week, in two shifts unit, and the existing plant uses 1,000 units of energy per week. of 30 workers per shift. The workers are paid $10 per hour. Adding With the modernized plant, the consumption of energy would fall a third shift is not possible because the plant is cleaned during the by 50%. third shift. The firm is contemplating a plant modernization to upgrade Discussion Questions existing equipment, which should increase the plant's output while 1. What is the productivity of the processing facility, with the lowering energy costs. Using the current equipment, around 1,500 equipment currently in use? pounds of salmon can be processed each hour, while the new plant 2. What would the productivity of the plant become if the new sys- would be able to process 2.000 pounds per hour. The updated equip tem were purchased and implemented? ment is made by the same manufacturer as the existing equipment, 3. What would be the amount of additional expense on equipment and the production personnel feel that they will be able to learn to that would make productivity of the two systems equal? use the new equipment quickly. For this reason, costs to train per- 4. What might happen if energy costs increase in the future? sonnel are assumed to be negligible. The production manager, Bjorn