Potential permanent tooling is to be evaluated for an operation. The estimated per unit savings in direct labor costs is $0.30, and the burden (overhead) on labor saved is 40%. The cost of each setup is $100, the MARR (interest rate) is 15%, the aggregate tax rate is 35%, and allowance for maintenance is 10%.
a) The estimated cost of the fixture is $4,000, and the set up will be performed 4 times each year. How many pieces must be made per year to have the fixture pay for itself, if 1, 2, and 3 year payback periods are used?
b) What fixture cost can be economically justified if 1, 2, and 3 year payback periods are used, and if the annual pro- es of 3,000 units each? duction i 12.00 units produced in 4 butchh?