XAMPLE PROBLEM A MAJOR POTENTIOMETER MANUFACTURER IS CONSIDERING TWO ALTERNATIVES FOR NEW PRODUCTION MACHINES WITH CAPACITY TO PRODUCE 20 000 UNITS PER DAY. ONE ALTERNATIVE IS FOR A HIGH-CAPACITY AUTOMATED PRODUCTION MACHINE CAPABLE OF PRODUCING 20 000 UNITS PER DAY WHEN OPERATED FOR THREE SHIFTS PER DAY. A QUARTER-TIME EMPLOYEE WOULD BE ASSIGNED TO MONITOR THE MACHINE (EMPLOYEE WOULD MONITOR OTHER MACHINES AT THE SAME TIME). WITH THE THREE-SHIFT SCHEDULE THIS WOULD BE EQUIVALENT TO A THREE-QUARTER-TIME EMPLOYEE. A SECOND ALTERNATIVE WOULD BE TO USE TWO MANUALLY OPERATED MACHINES, EACH CAPABLE OF 10 000 UNITS PER DAY ASSUMING THREE-SHIFT OPERATION. HERE, A TOTAL OF SIX EMPLOYEES (2 PER SHIFT, 3 SHIFTS) WOULD BE NEEDED. IF LABOR COSTS (INCLUDING WAGES, BENEFITS, ETC.) ARE $40 000 PER EMPLOYEE PER YEAR, RECOMMEND WHICH ALTERNATIVE IS BEST USING THE EQUIVALENT UNIFORM ANNUAL COST METHOD. Alternative 1 Alternative 2 Cost to purchase $500 000 $100 000 Number of machines required 1 2 2 6 Number of employees required Expected life of machine 10 yr 10 yr Interest rate 8% 8% Annual maintenance cost per machine $30 000 $10 000 Salvage value at 10 years per machine $100 000 $20 000