Issue link: https://iconnect007.uberflip.com/i/1506834
62 SMT007 MAGAZINE I SEPTEMBER 2023 seldom required maintenance and when they did, the service team was prompt and required less time than they predicted to make the repairs. ese assemblers were curious about Paul's project as they had hoped to use the results in their explanation to their manage- ment as to why Pinnacles had the best bang for the buck. Paul was quite good at math and was enjoy- ing this project. He thought it might be best to perform a rough calculation to start. e Pin- nacle's placement speed was 30% faster than the Excel's. From discussions he had with other assemblers, he estimated that with the Pin- nacles, the line was down 3% of the time for repairs; for the Excels, the line was down 5% of the time. Paul estimated that this benefit added another 2% to the speed of the Pinnacles, mak- ing them 32% faster than the Excels. Dr. Maggie (he still didn't know if Maggie had a PhD, but he felt it was best to err on the high side) told him she expected that this type of line would make a profit of about $500,000 a year. In his rough calculation, he estimated that since the Pinnacles were 32% faster, they would produce 32% more profit, all other things considered equal. erefore, the Pinna- cles should generate 32% of $500,000, which equaled $160,000 more profit than the Excels. If the equipment was to be amortized over five years, that would be $200,000 for the Pinna- cles and $120,000 for the Excels—a difference of $80,000. So, the $160,000 more in profit out- weighs the difference in amortized price. Paul still felt he was missing something, so he decided to chat with Sue and Andy. ey met for ice cream aer work. Paul reviewed what he had done. "I think I am missing something," Paul sum- marized to the couple. "Why don't we develop a list of income and expenses and see what it says?" Andy sug- gested, and Sue said, "Maggie said a line like this one would generate about $500,000 in profit over a year. A typical board sells for $50. Most of Benson Electronic (BE) lines produce about 100,000 to 200,000 boards per year. Let's assume the Excel line produces 120,000 boards per year and the Pinnacle line does 32% more or 158,400." "Sue and I have been performing some financial modeling of lines," Andy added, "and we know that labor costs about $850,000 per year, with rent and utilities about $100,000 per year." "Whoa, our spreadsheet shows the Pinnacle line generating $769,880 in profit, whereas the Excel line generates only $327,000," Paul said. "at can't be right." Sue and Andy chuckled in unison, and Andy said, "e spreadsheet is Figure 1: Paul, Sue, and Andy developed a spreadsheet. Note how much more profit the Pinnacle machines produced.