The cycle time for the robotic assembly of a centrifugal pump is estimated at 22
ID: 2407308 • Letter: T
Question
The cycle time for the robotic assembly of a centrifugal pump is estimated at 22 seconds. The current assembly time using manual methods is 30 seconds. Given that the annual production requirement is 460,000 units, discuss the financial viability of using robots for this application. The following additional information is available :
Cost of Assembly Robot $75,000
Cost of Safety System $10,000
Cost of Feeders, Tooling etc $30,000
Annual Operating Costs $10,000
Labour Costs (including overheads) $45,000 / worker / annum
Profit $2.00 / unit
Required Rate of Return on Investment 10 % per annum
Year Discounting Factor
1 0.9
2 0.82
3 0.74
4 0.67
5 0.60
It may be assumed that production is carried out for two eight hour shifts per day, five days a week and forty eight weeks a year. State any assumptions made in your analysis.
Explanation / Answer
No. Of units (New) = 2*8*5*48*1440/22 = 251,345
Current = 184,320
Incremental Profit = 2*67025 =134050 per year
PVCI (Present Value of Incremental Inflows)=3.79*134050 = 508050
Costs:
Assembly Robot 75000
Safety System 10,000
Feeders, Tooling 30,000
Annual Operating Costs (PV) = 3.79*10,000 = 37,900
Net Benefit = 355,150
Hence, the robots should be used because of incremental profit of 355,150
Assumption: Labour force requirement will not change in the new robotic system.
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