Machines A, B, C, and D Have Been in Use

question 53

Essay

Machines A, B, C, and D have been in use for several years, while machine E is new. The following table provides data on the value of production of each job when performed on a specific machine.
a. Determine the set of assignments that maximizes production value.
b. What is the total production value of your assignments?
c. Which machine should be retired (i.e., gets no assignment)?
d. If they do retire one machine, will they be as profitable without it as with it? Explain. $$\begin{array} { | l | l | l | l | l | l | } \hline & { \text { Machine } } \\\hline \text { Job } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\1 & 27 & 29 & 28 & 30 & 40 \\ 2 & 30 & 32 & 31 & 34 & 46 \\3 & 33 & 25 & 29 & 26 & 37 \\4 & 29 & 31 & 24 & 28 & 28\\\hline\end{array}$$

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Definitions:

Minimum Return

The lowest acceptable rate of return on an investment that a manager or investor is willing to accept, considering the risk and capital involved.

Profit Margin Component

A financial metric that measures the amount of net income generated as a percentage of revenue, indicating the efficiency of a company in converting sales into actual profit.

Operating Income

Earnings before interest and taxes (EBIT), representing the profit a company makes from its operations, before non-operating incomes and expenses.

Residual Income

Income that remains after all operating expenses and costs of capital have been subtracted from revenues.