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Use the following scenario to answer the next two questions. Sometimes it is cheaper to design and construct one multipurpose tool that will serve two or more similar designs. There are complications that can thwart this practice, such as simultaneously scheduling of parts or whenever the designs are so radically different that multipurpose tools are more expensive than if one tool were available for each design. Though multipurpose tooling may, at first, appear to offer cost benefits, the operation cost for different parts may cancel out many of those gains. Two product designs are called Left Hand and Right Hand and are sufficiently similar to allow multipurpose tools. Consider the following:

Left Hand (LH) Right Hand (RH) Multipurpose (RH/LH)
Cost of tool $47,500 $32,500 $62,000
Productive hour cost per unit $1.92 $2.17 $2.65 (RH), $2.03 (LH)
Lifetime units 83,000 27,500

What is the cost if two tools are built? (Hints: Productive hour cost per unit includes direct labor and machine cost. Ignore material cost in the analysis.)

What is the cost if one tool is built? (Hints: Productive hour cost per unit includes direct labor and machine cost. Ignore material cost in the analysis.)

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