A manager of Splitter Manufacturing that produces computer hard drives is planning to lease a new automated inspection system. The manager believes the new system will be more accurate than the current manual inspection process. The firm has had problems with hard drive defects in the past and the automated system should help catch these defects before the drives are shipped to the final assembly manufacturer. Respond to all questions based on the data provided. Current Manual Inspection System Annual fixed cost = $45,000 Inspection variable cost per unit = $15 per unit New Automated Inspection System Annual fixed cost = $165,000 Inspection variable cost per unit = $0.65 per unit 2. In Problem 1, assume the cost factors given in “current manual system” have not changed. A marketing representative from Hi-Quality, a firm that specializes in providing manual inspection processes for other firms, approached Splitter Manufacturing and offered to inspect parts for $18.25 each with no fixed cost. Hi-Quality assured Splitter Manufacturing the accuracy and quality of their manual inspections would equal the automated inspection system. Demand for the upcoming year is forecast to be 9,000 units. a. Should the manufacturer accept the offer? Why or why not? b. What are some factors that would have to change for the manufacturer to choose the alternate decision?
- A manager of Splitter Manufacturing that produces computer hard drives is planning to lease a new automated inspection system. The manager believes the new system will be more accurate than the current manual inspection process. The firm has had problems with hard drive defects in the past and the automated system should help catch these defects before the drives are shipped to the final assembly manufacturer. Respond to all questions based on the data provided.
Current Manual Inspection System
Annual fixed cost = $45,000
Inspection variable cost per unit = $15 per unit
New Automated Inspection System
Annual fixed cost = $165,000
Inspection variable cost per unit = $0.65 per unit
2. In Problem 1, assume the cost factors given in “current manual system” have not changed. A marketing representative from Hi-Quality, a firm that specializes in providing manual inspection processes for other firms, approached Splitter Manufacturing and offered to inspect parts for $18.25 each with no fixed cost. Hi-Quality assured Splitter Manufacturing the accuracy and quality of their manual inspections would equal the automated inspection system. Demand for the upcoming year is
a. Should the manufacturer accept the offer? Why or why not?
b. What are some factors that would have to change for the manufacturer to choose the
alternate decision?
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