Question

In the following situation, should one machine be purchased and operated 24   hours a day, or should three machines be bought and operated 8 hours?

1. The machine cost $ 120000 with an economic life of 10 years.
2. The 24 operation is really only 95% efficiency because of maintenance and repair activities.
3. Labor is paid in full no matter how many hours they work in each shift.
4. First shift operators get $ 12, second shift operators get $ 14, and third shift operators get $ 16.5 per hour.

With regular one-shift production, the company does not pay for lunch so it gets 8 hours’ work for 8 hours’ pay.

Since the plan is to work 6 days a week, what action would you take? Discuss your findings.

Answer 1

Action to be taken is to install 3 machines instead of 1 machine.

For 1 machine option (95% efficiency)

Available time = 6 days x 24 hours x 95%

Available time = 136.8 hours

But labors are to be paid for = 6 days x 24 hours = 144 hours

Idle time (under-utilised) = 144 hours - 136.8 hours = 7.2 hours

Workers are to be paid for 7.2 hours idle time due to repair and maintenance activity.

For machine 3 option

Available time = 6 days x 3 x 8 hours

= 144 hours

No loss of time in comparison to the option of 1 machine. So, the action of 3 machines should be taken.