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The Economics of Automation --- Some Important Considerations

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1 Author(s)
Lawson, A. ; Melpar Inc.

It is suggested that both the machinery builder and the user need to know the savings reflected in the end product. The "break-even point" is described as the time when the variable costs due to automation are less then the variable manual costs, by the amount of the automation capital investment. A break-even load curve relates savings during a regular 8-hour day to a longer or shorter working day. By observing the distinctions between fixed costs and variable costs and by using conservative estimates, the capabilities of the Mini-Mech system are presented. Three years is suggested as the useful life for electronic automation equipment, in contrast with the usual 15-year amortization period for other machinery, and with some confidence that the Internal Revenue Service will see eye-to-eye with the user. It is estimated that the Mini-Mech system might require an initial total investment of $25,000; machinery modification costs are estimated at 50% of this figure over the three-year period, as component parts and techniques are improved. At an insertion rate of 24 component parts per minute, the quoted variable saving is approximately $275 per day, and with a break-even point at 123 days. It is stated that, up to this point, hand methods are cheaper as a result of lower fixed costs; but beyond this point, machine methods are cheaper since accrued variable-cost savings will have liquidated the higher fixed costs of the automatic equipment.

Published in:

Production Techniques, IRE Transactions on  (Volume:1 ,  Issue: 1 )