Considering using a special-purpose screw-driver

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A metal-working manufacturer is considering using a special-purpose screw-driver in making automobile tuneup. It is assumed that the screwdriver has an application life of 5 years. The manufacturer usually conducts 800 tune-up per year with an average time of 1.0 hour/tune-up. The direct labor cost is $20/hour. The existing screwdriver for auto tune-ups requires 1 minute per tune up, while this new screwdriver only requires 20 seconds. The proposed screw-driver will cost 150$. If we neglect other costs, please calculate:

1) Total savings of the new screw-driver during the application life

2) Net saving per year with the new screw-driver

Reference no: EM13757670

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