Maladroit Cosmetics Company:
The plant manager of the Maladroit Cosmetics Company must replace several of her filling machines that have become obsolete. She is about to take delivery of six machines at a total cost of $4 million. These machines must be installed and fully tested in time to be used on a new production line scheduled to begin operation in six months. Because this project is important, the plant manager would like to devote as much time as possible to the job, but she is currently handling several other projects. She thinks she has three basic choices: 1) she can handle the project informally out of her office; 2) she can assign the project to a member of her staff; or 3) the company that manufactures the machines can handle the installation project for a fee close to what the installation would cost Maladroit.
Questions: Which of the three choices do you recommend, and why? If the project was one small machine at a total cost of $4,000, would your answer be different? Discuss the relative importance of the capital investment required versus the role of the investment in machinery.