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Rochem LTD Assignment

The document compares two process technologies, Chemling and AFU, that Rochem LTD is considering. [1] Chemling has a lower monthly production capacity and higher per unit costs than AFU. [2] AFU is more viable as it has automatic testing, immediate delivery, and is more competitive for the future. [3] The document recommends that Rochem purchase the AFU technology as it has lower total costs per unit and higher production capacity than Chemling.

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396 Abdul Gaffar
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292 views2 pages

Rochem LTD Assignment

The document compares two process technologies, Chemling and AFU, that Rochem LTD is considering. [1] Chemling has a lower monthly production capacity and higher per unit costs than AFU. [2] AFU is more viable as it has automatic testing, immediate delivery, and is more competitive for the future. [3] The document recommends that Rochem purchase the AFU technology as it has lower total costs per unit and higher production capacity than Chemling.

Uploaded by

396 Abdul Gaffar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Rochem LTD

(Case Study)
1. How do the tow alternate process technologies (Chemling and AFU)
differ in terms of their scale and automation? What are the
imprecation of this for Rochem?
Detail Chemling Machine AFU Machine
Variable cost per unit £ 750 £ 600
No. of unit per month 105 kg 140 kg
Capacity 98% 99.50%
Unit Capacity/month 105*98%= 102.9 140*99.50%=138.6
TVC: £750 * 102.9= £77175 600 * 138.6= £83160
V.C per unit * unit capacity
Fixed cost £ 15,000 £ 40,000
TC=TVC + FC (£77175 + £15000) = £ 92175 (£83160 + £ 40000) = £ 123160
TC/Unit: (£92175 / £102.9) = £895.77 (£123160 / £138.6) = £888.60
(TC per month/ unit
capacity)

Per unit cost (Chemling – AFU):

£895.77 - £888.60 = £7.17

So, the Chemling’s machine total cost per unit is higher by £7.17.

2. Remind yourself of the distinction between feasibility accessibility


and vulnerability discussed in chapter 4 evaluate both technologies
using these criteria?
Evaluating the two alternative technologies according to their characteristics
and long-term prognosis, the new Chemling has manual testing as opposed AFU to
automatic testing. Also, AFU delivered immediately and Chemling delivered in three
months. So AFU is more viable.
AFU technology is what all similar technologies of the future will look like.
Technology adoption will improve company competitiveness and increase return on
investment as well as resource base.
Finally, any manufacturing operation must keep in mind that the unit cost of a
product is an important factor in measuring performance. In the case of Rochem Ltd,
the total cost per unit of Chemling's machine is £7.17 higher. Hence, AFU is more
profitable as a long-term investment.

3. What would you recommend the company should do?


According to production of Chemling and AFU Machines, Chemling cost is higher
the AFU. Chemling cost is £895.77 and AFU cost is £888.60. Chemling production is
£102.9 per month and AFU production is £138.6 per month. AFU cost is lower,
production is high and fast delivery then Chemling. So we recommend to buy
AFU.

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