Guardian is a national manufacturing company of home health care appliances. It is faced with

a make-or-buy decision. A newly engineered lift can be installed in a car trunk to raise and

lower a wheelchair. The steel arm of the lift can be purchased internationally for $3.50 per unit

or made in-house. If manufactured on site, two machines will be required. Machine A is estimated

to cost $18,000, have a life of 6 years, and have a $2000 salvage value; machine B will

cost $12,000, have a life of 4 years, and have a $_500 salvage value (carry-away cost). Machine

A will require an overhaul after 3 years costing $3000. The annual operating cost for

machine A is expected to be $6000 per year and for machine B is $5000 per year. A total of four

operators will be required for the two machines at a rate of $12.50 per hour per operator. In a

normal 8-hour period, the operators and two machines can produce parts suffi cient to manufacture

1000 units. Use a MARR of 15% per year to determine the following.

(a) Number of units to manufacture each year to justify the in-house (make) option.

(b) The maximum capital expense justifi able to purchase machine A, assuming all other estimates

for machines A and B are as stated. The company expects to produce 10,000 units

per year.