A metal part for which annual demand is 240,000 units is made on a CNC machine a
ID: 2996111 • Letter: A
Question
A metal part for which annual demand is 240,000 units is made on a CNC machine at a rate of 360 parts per hour. It can be made using tool steel costing $0.30 per pound or using brass stock costing $1.40 per pound. The weight per steel piece is 0.0353 pounds and the weight per brass piece is 0.0384 pounds. When it is made using steel, it was found that 50% of the parts made per hour are defect-free; when it made using brass stock, it was found that 85% of the parts made per hour are defect-free. If the total labor and overhead cost for operating the machine is $25.00 per hour, how much more does it cost to make 1000 defect-free parts from steel than to make 1000 defect-free parts from brass on this machine? (Enter your answer as a number without the dollar sign.)
Explanation / Answer
Demand of metal parts = 2,40,000 units
No. of parts produced per hour = 360 units/hr
Cost of Tool Steel = $ 0.3/pound
Cost of brass = $ 1.4/pound
Weight/Tool Steel = 0.0353 pounds
Weight/brass = 0.0384 pounds
When parts with Tool Steel are made = 50% parts are defect free
When parts with brass are made = 85 % parts are defect free
Labour and Overhead cost = $25/hr
1) For Tool Steel
No. of parts produced (defect free) per hour = 360 x 0.5 = 180 units
Cost of part made with tool steel = 0.3 x 0.0353 = $0.0106
No. of hours required to make 1000 defect free parts = 1000/180 = 5.56 hrs
Total Cost to make 1000 defect free parts = (0.0106 x 1000) + (5.56 x 25) = $149.6
2) For brass
No. of parts produced (defect free) per hour = 360 x 0.85 = 306 units
Cost of part made with tool steel = 1.4 x 0.0384 = $0.0538
No. of hours required to make 1000 defect free parts = 1000/306 = 3.27 hrs
Total Cost to make 1000 defect free parts = (0.0538 x 1000) + (3.27 x 25) = $135.55
Difference in cost = 149.6 - 135.55 = $14.05
Conclusion: It will be cheaper to make parts with Brass in comparison to Tool Steel