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What is the maximum amount you will pay for the new process

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Question - A manufacturer makes 7,900,000 memory chips per year. Each chip takes 0.4 minutes of direct labour at the rate of 68 per hour. The overhead costs are estimated at £11 per direct labour hour. A new process will reduce the unit production time by 0.01 minutes. If the overhead cost will be reduced by $5.50 for each hour by which total direct hours are reduced, what is the maximum amount you will pay for the new process? Assume that the new process must pay for itself by the end of the first year.

Reference no: EM133154691

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