Our enterprise is currently operating 5 days per week; one 8.0 hour shift per day, 50 weeks per year. No overtime is required. We have 124 hourly workers paid an average of $18.68 per hour. Our cases produced per hour = 2500 (each containing 24 units).
Sales forecasts do not call for any added annual production.
Our Engineering manager has a proposal for a new production line that will increase output to 3200 cases per hour. The added cost of depreciation is estimated to be $500,000 per year. Additional maintenance per year is estimated to be $78,400.
What is the net savings per year [labor saved – (added depreciation and maintenance)], if the proposed line is purchased and installed?
What is the proposed net labor savings per case?
What is our existing output expressed in cases per year?
What major issue(s) must be addressed if the proposed equipment is installed?