9- A particular metal component part can be machined on either an engine lathe or a turret lathe.
In either case, the machines are not used exclusively for this particular part. Rather, parts are
produced in batches according to a customer's order. If a customer's order is produced on the
engine lathe, the following information is relevant;
Set-up time required per order = negligible
Direct labor and machine time per part = 10 minutes
Direct labor rate = $15/hour
Machine rate = $8.00/hour
Cutting tool cost per part = $0.30/unit
If the part is produced on the turret lathe, a set-up of machine is required each time a customer's
order is processed. The set-up is required only once per order if the order size is less than or
equal to 200 units. If the order size is greater than 200 units, then a set-up is required every 200
units. Relevant time and cost data are given below;
Set-up time required per order
(both the operator and machine
time is charged to the order) = 2 hours
Direct labor and machine time per part = 2 minutes
Direct labor rate = $14/hour
Machine rate = $20.00/hour
Cutting tool cost per part = $0.15/unit
The material cost per unit is the same regardless of the machine used. Which is the economical
machine to use for order sizes of 100, 290 and 700 units?
