Problem 3 (20 points)

A production machine operates in a semi-automatic cycle but a worker must attend the machine 100% of

the time to load parts. Unloading is accomplished automatically. The worker's cost rate=25 SR/hr and

the equipment cost rate= 52.00 SR/hr. The applicable overhead cost is 41%. The material cost is 5.75

SR/pc. The job runs several months so the effect of setup can be ignored. Each cycle, the actual process

time = 78 sec, and time to load the part = 35 sec. Automatic unloading takes 6 sec. A proposal has been

made to install an automatic parts-loading device on the machine. The device would cost 127,500 SR and

would reduce the part loading time to 8 sec each cycle. Its expected life is 3 years. The device would also

relieve the worker from full-time attention to the machine. Instead, the worker could assist two machines.

The operation runs 245 days per year, 16 hours per day, machine availability = 94%, and scrap rate=

4%. Determine the cost per part produced: (a) without the parts loading device; (b) with the parts loading

device installed. (c) How many days of production are required to pay for the automatic loading device?

In other words find the breakeven point.