The management in your company is in the opinion that it is time to change the lathe machine that has been used for 30-years in the company. The current machine has a capacity of 200 units. The company is considering replacing the machine to an improved version of lathe machine which carries a capacity of 1000 units. As the operation engineer, you need to provide the assessment below:
a). If the cost was $300,000 – 30 years ago and is $1,000,000 today, what is the implied cost-capacity factor?
b). If the cost index 30 years ago was 300, and cost-capacity factor is 0.8, what is the implied cost index today?
c). If the cost index has increased by a factor 0f 4.5, what is the implied cost-capacity factor?
