A metal-working manufacturer is considering to use a special-purpose screw-driver in making automobile tune-up. It is assumed that the screwdriver has an application life of 5 years.
The manufacturer usually conducts 800 tune-up per year with an average time of 1.0 hour/tune-up. The direct labor cost is $20/hour.
The existing screwdriver for auto tune-ups requires 1 minute per tune up, while this new screwdriver only requires 20 seconds. The proposed screw-driver will cost 150$. If we neglect other costs, please calculate:
Total savings of the new screw-driver during the application life
Net saving per year
Annual return on the investment before tax (%)