case-3a prod-eng= maintenance engineering design - copy - copy
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8/19/2019 CASE-3A PROD-ENG= MAINTENANCE ENGINEERING DESIGN - Copy - Copy
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TECHNOLOGY-BASED
PRODUCTIVITY
MAINTENANCE
ENGINEERING
CASE -A
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CASE
Manufacturing Engineering Company Plc, just bought a set of
machines early this year at a total cost of $ 30.000. The facility tobe used to produce a certain type of machine parts andcomponents at a capacity of .000 do!ens at the first year. "orthe follo#ing years, the capacity #ill be increased by 300 do!ensper year until the third year and 00 do!ens per year after#ards.%t is e&pected that the useful life time of the manufacturinge'uipment #ould be ( years #ith the sal)age )alue of $ *.000.
+ased on the pre)ious e&periences, about 0 of effecti)e #or-ing days #ere #asted by do#n time due to une&pectedmachine brea- do#ns and repair #or-s. %n addition, there #asabout ( of products produced #asted due to defect.
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ccording to Manufacturing /epartment eports, unit cost ofproduction at factory le)el is $ .00 for materials, labours and
energy #hich ha)e a composition of 10 , *( and ( e&cluding repair 2 maintenance cost and depreciation charge.eneral and dministrati)e e&pences #ere estimated at theamount of $ .(00 per year.
4ales /epartment eport estimates that the selling price of theproduct is predicted $ 5.00 per do!en including ( commissionfee for distribution and promotion partner company. The "inancial/epartment eports resumed that, the company6s financial
performances is considered that this project #ill be satisfactorycompared #ith its sister manufacturing company #hich achie)ed% less than ( in the same periods of time
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The financial analysis indicated that the main problem of thecompany stemmed from unplanned maintenance system of thee'uipment #hich caused the company lost its effecti)e #or-ing
days. %n addition, there is another cost to pay for reparing the bro-enmachines. %t #as estimated that annual repair cost is about 0 ofthe initial cost of the e'uipment.
%n order to impro)e the financial performance of the company,eneral Manager had de)eloped ne# policy on maintenancesystem. Pre)enti)e maintenance rather than brea-do#n systemshould be performed. ccording to engineering and cost analysis,
pre)enti)e maintenance to be scheduled e)ery * months. %t isestimated that effecti)e #or-ing days lost #ould be reduced to aminimum le)el of 1 and ( for the first and second year and annualy for the last three years
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nnual repair cost #ould decrease to be only * of the initial
cost of the e'uipment. The amount of product defects #ould be
reduced to be only 3 and * for the first and second year and for the last three years. The cost of implementing the
pre)enti)e maintenance system #as estimated $ .000 per
annum.
Prepare an analysis of producti)ity impro)ement both total
producti)ity and partial producti)ity of capital for ( years
operation. 7se the follo#ing data format for the analysis.
ssumption 8 9 :o of annual #or-ing days ; *(0 days
9 %nterest rate ; 0 < annum
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A. Under Breakdown Maintenance System (Existing System)
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Description Year
* 3 (
=or-ing days >days days do!ens?
The amount of defects >do!ens?
The amount of sales >do!ens?
Total sales >$0?
:et sales
epair 2 maintenance cost >$$
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A1. Profit and Loss Account
Description Year
* 3 (. :et sales >$?
*. Costs of production >$?
9 Material costs
9 @abor costs 9 Energy costs
9 epair 2 maintenance
9 /epreciation charge
9 eneral 2 adm e&pences
Total production cost
3. ross profit >$?
. %ncome ta& *0
(. :et profit >$?
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A2. Cashfow Projection
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Description 0 1 3 4 5
. %nitial cash >$?
*. Cash in >$?
9 :et sales
9 4hare
Total cash in
3. Cash out >$?
9 Machinery purchase
9 Materials
9 @abor
9 Energy
9 epair 2 maintenance
9 eneral 2 adm e&p.
9 %ncome ta& payment
Total cash out
. +alance >$?
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A3. Net Present Value (NPV)
Year !apita"#$t"ay
(%)
!as&'roceed (%)
et !as&(%)
'resent a"$eat 1 *
0
*
3
(
(
+ota"
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A4. Internal Rate of Return
Aear Capital
Butlay>$?
Cash
Proceed>$?
:et Cash
>$?
Present
alue at(
Present
alue at
*
0
*
3
((
+ota"
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A5. Productivity o Ca!ital
Description Year
1 , -
Butput >$?%nput >$?
9 Material
9 @abor
9 Energy
9 eneral 2 adm costs
9 Maintenance 2 repair
9 /epreciation charge
Total input
Producti)ity Measurement
. Total Producti)ity >$$
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B. Under 're/enti/e Maintenance System
t the beginning of the fourth year, the pre)enti)e maintenance system
#as implemented. %t resulted in an impro)ement of the numbers of both
effecti)e #or-ing days and good 'uality products.
Aou are as-ed to de)elop 8
a. Profit 2 @oss ccount
b. Cash "lo# Projection
c. :et Present alue
d. %nternal ate of eturn
e. Total Producti)ity and Producti)ity of Capital.
i)e your comment if the changing of the maintenance system pro)ideda significant impro)ement
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Productivity Analysis
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Description Year
* 3 (
=or-ing days >days days do!ens?
The amount of defects >do!ens?
The amount of sales >do!ens?
Total sales >$0?
:et sales
epair 2 maintenance cost >$$
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B1. Profit and Loss Account
Description Year
* 3 (
. :et sales >$?
*. Costs of production >$?
9 Materials
9 @abor 9 Energy
9 epair 2 maintenance
9 /epreciation charge
9 eneral 2 adm e&pences Total production cost
3. ross profit >$?
. %ncome ta& *0
(. :et profit >$?
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B2. Cashflow Projection
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Description 0 1 , -
. %nitial cash >$?
*. Cash in >$?
9 :et sales
9 4hare
9 Bther
Total cash in
3. Cash out >$?
9 Machinery purchase
9 Materials, labor etc
9 epair 2 maintenance
9 eneral 2 adm e&p.
9 %ncome ta& payment
Total cash out
. +alance >$?
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B. !et Present "alue #!P"$
Aear CapitalButlay
>$?
CashProceed
>$?
:et Cash>$?
Present alueat interest of
emar-
0
*
3
(
(
Total
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B4. Internal Rate of Return #IRR$
Aear CapitalButlay
>$?
CashProceed
>$?
:et Cash>$?
Presentalue
at *
Presentalue
at (
0
*
3
(
(
Total
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B%. Producti&it' of Ca(ital
Description Year
1 , -
#$tp$t (%)np$t (%)
9 Material
9 @abor
9 Energy9 eneral 2 adm costs
9 Maintenance 2 repair
9 /epreciation charge
+ota" np$t
'rod$cti/ity Meas$rements
. Total Producti)ity >$$
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