Mssarah

NorSal Trondheim operates a salmon process facility. Fish are purchased from local sources along the North Sea processed at the facility, and sold to customers for distribution. The plant manager, Inger Hansen, is comtemplating a plant modernization to upgrade the technology in the plant to increase the capacity per hour, which is particularly advantageous because the factory has enough demand to cover the additional capacity. Currently, the plant operates 5 days a week, in two shifts of 40 workers per shift. The workers are paid $10 per hour. Adding a third shift is not possible because the plant needs to be cleaned during this time.

The firm is contemplating a plant modernization to upgrade existing equipment, which should increase the plant’s output while lowering energy costs. Using the current equipment, aound 2000 pounds of salmon can be processed each hour, while the new plant would be able to process 2500 pounds per hour. The updated equipment is made by the same manufacturer as the existing equipment, and the production personnel feel that they will be able to learn to use the new epuipment quickly. For this reason, costs to train personnel are assumed to be negligible. The production manager, Bjorn Pedersen, is skeptical about the benefit of the plant modernization. The older equipment, he argues, is already paid for, and new equiupment would cost $10,000 per week. This cost includes both principal and interest, as well as manufacturer installation of the equipment.

The controller, Maret Karlsen, cautions that all decisions related to costs should be included in the analysis and that the different energy consumption of the new equipment must also be accounted for in the decision. Energy costs are presently $12 per unit, and the existing plant uses 1,200 units of energy per week. With the modernized plant the consumption of energy would fall by 45 %.

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