Quizzol

QUESTION:

The

Boston

Food Bank is a nonprofit organization that receives donations of food and distributes this food to appropriate charitable organizations. He used this wait time data and the following assumptions to determine the financial benefit of buying a second shrink-wrap machine.

Additional Info

Many times, large quantities of food need to be shrink-wrapped to secure the items for shipping to the charitable organizations. The VP of Operations at the

Boston

Food Bank recently performed a time study of the time that its warehouse personnel spend waiting for the shrink-wrap machine to become available

Assumptions

Requirement 1. What is the expected net cash inflow per year from purchasing a second shrink-wrap machine (i.e., how much cost could be saved each year by eliminating the wait time)?

Requirement 2. What is the payback period of the second shrink-wrap machine? Round your answer to two decimal places.

Requirement 3. What would the expected net cash inflow per year be if the hourly wage rate used for this analysis was increased by

20 %

to reflect the cost of employee benefits?

Requirement 4. What is the payback period of the second shrink-wrap machine when the increased wage rate is used to calculate the expected net cash inflow per year? Round your answer to two decimal places

Requirement 5. Did the payback period using the increased hourly wage rate increase or decrease as compared to the original payback period using the hourly rate without any benefits included? Explain

ANSWER:

Requirement 1

3500

Explanation

Step 1: Calculate the total wait time per year (in hours)

Average wait time per picker per day: 60 minutes = 1 hour
Number of pickers: 15
Days worked per year: (5 days/week) × (52 weeks - 2 weeks for holidays) = 250 days

$\text{Total wait time per year} = 1 \, \text{hour/day} \times 15 \, \text{pickers} \times 250 \, \text{days} = 3,750 \, \text{hours/year}$

Step 2: Calculate the cost of waiting time per year

Hourly wage of warehouse personnel: $10.00/hour

$\text{Total cost of waiting per year} = 3,750 \, \text{hours/year} \times 10 \, \text{\$/hour} = 37,500 \, \text{\$/year}$

$Requirement 2$

What is the payback period of the second shrink-wrap machine? Round your answer to two decimal places.

First enter the formula, then calculate the payback period.

Initial investment	÷	Expected annual net cash inflow	=	Payback period
$23,000	÷	$37,500	=	0.61	years

$Requirement 3$

$45000$

$Total cost of waiting per year = 3, 750 hours/year \times 12.00 $/hour = 45, 000 $/year$

$Requirement 4$

$0.51 years$

the payback period is calculated as:

$\text{Payback Period} = \frac{\text{Cost of Investment}}{\text{Annual Net Cash Inflow}}$

$The payback period using the increased hourly wage rate$

$as compared to the original payback period using the hourly rate without any benefits included because$

Posted by Cleveland on September 5, 2024

Step 1: Calculate the total wait time per year (in hours)

Step 2: Calculate the cost of waiting time per year

Part 3