Planning to replace outdated equipment with models

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A company is planning to replace outdated equipment with models that are more energy-efficient and environmental-friendly. Two models are under consideration. Model A is sold for $159,000 and can produce at an optimum speed of 78 units/hour. Model B is sold for the same price, but can produce at an optimum speed of 76 units/hour. Model A requires 6 hours of maintenance for every 4300 units produced, while Model B requires 5 hours of maintenance for every 3300 units. The maintenance cost for both models is $100 per hour. The variable operating cost is $340 per hour for Model A and $290 per hour for Model B. Due to obsolete parts, there is a sunk cost of $2700 for model A and $1900 for Model B. The price of the product is $150 per unit and the company expects to sell 145,000 units each year.

What extra information is provided in the problem statement that is not required to answer part

Which model should be selected? Show your steps and rational.

Reference no: EM131244387

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