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Monday, 23 March 2015

PRODUCTION MANAGEMENT - PAY BACK PERIOD



PRODUCTION MANAGEMENT

Topic: PAY BACK PERIOD  

For: Questions and answers email: theotherwomaninmarriage@gmail.com

Here, we are going straight to the formula:

Pay Back Period:
P=       I____
   L-E+q (L=Z)

Where:
P       =        Pay Back Period
I         =        Investment
L        =        Labour
E        =        maintenance cost
Q       =        Fractional Speed up/slow down
Z        =        Annual Depreciation

ILLUSTRATION:
Ali Kai Juwa  Company Limited is considering using a Robot to spray paint inside panels of its tape drives.

Given the following information, should the company make the investment?  What will be the Pay Back Period of the return on investment?

Cost of Robot & Accessories N50,000, the  cost of labour is N60,000( two workers at 20,000 each – working one of two shift), overhead is N10,000.  Annual maintenance cost N9,600 (N2 per house multiply by 4,800 per hours per year).  A Robot spray panting work about 150% faster than a human.  The annual deprecation of the Robot is N10,000. 

 SOLUTION:
Where:
I         =        50,000
L        =        60,000
E        =        9,600
Q       =        1.50
Z        =        10,000

P       =                                50,000______________
                   60,000 – 9,600+1.5 (60,000 + 10,000)

P       =                                50,000_______
                               50,400+1.5 (70,000)

P       =                                50,000____
                                50,400 +150,000

P       =                                50,000____
                                         155,500

P       =                 0.32 years/months




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