Question

Larson Manufacturing is considering purchasing a new injection-molding machine for $250,000 to expand its production capacity. What is the cost of the machine?

Answer 1

The cost of the new injection-molding machine Larson Manufacturing is considering is $250,000. The company should evaluate how changes in machine costs impact the total cost of production in combination with labor costs to determine the most cost-effective method.

Step-by-step explanation:

The cost of the injection-molding machine Larson Manufacturing is considering purchasing is $250,000. When making such decisions, it is important to consider not only the cost of the machine but also the cost of labor and the overall impact on production costs. For example, if the cost of labor remains constant and the cost of machines changes, this could affect the total production cost. Suppose labor costs remain at $40 per hour, and the cost of machines was initially $50 and then increases to $55, total costs will be calculated by adding the revised machine costs to the labor costs across the various methods.

If we had instances where the cost of labor plus the cost of machine per hour were $720 + $600, $960 + $400, and $1,200 + $200, an increase in machine costs would result in higher total production costs for each method. The firm would then need to re-evaluate which method would be most cost-effective under these new conditions.

Answer 2

The cost of the injection-molding machine is $250,000. Scenario analysis would be conducted if costs for machines and labor change to determine the impact on the total cost of different production methods, guiding the firm on which method to choose.

Step-by-step explanation:

The cost of the new injection-molding machine for Larson Manufacturing mentioned in the question is $250,000. This cost is a critical figure for the company as they consider expanding their production capacity. To give context to possible additional expenses, let's analyze a situation where the cost of labor is fixed at $40/hour, and the cost of machines is variable.

Scenario Analysis with Different Machine Costs

If the cost of machines increases to $55, while the cost of labor remains at $40, we'd need to recalculate the total cost for various production methods that the firm might be considering. This adjustment would affect the total cost of each method, possibly making some methods more cost-effective than others. The firm would then choose the method resulting in the lowest total cost, maintaining efficiency and cost-effectiveness within its operations.

Conversely, if the cost of a machine decreases to $50, keeping the cost of labor at $40, the total cost of each production method would decrease. The company would then reassess the methods to identify which provides the greatest value at the new lower machine cost.