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| Topic: |
Business
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| Number of pages / Number of words: |
4 / 1040 |
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We do not need to take the hidden costs into consideration because it is not affected by reducing the driving time or pad changing time. So (420–19)min /60min = 6 hrs 41 min time saving. Because the contractors have to spend $100 per hour, Colerick probably save about $668/6 pads =$111.33 on equipment rental, labor and overhead costs for this work by using CMI’s pads...
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So the worth of CMI’s pad is $166.67+$111.33 = $278.00
CMI should choose the option to purchase the $50000 permanent tooling, because it will reduce cost per unit by $78.94. By this cost saving alone we can get back the money we invested in the tooling in less than 3 months. This will maximize profit in the long run...
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