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Problem:

A firm plans to begin production of a new small appliance. The manager has three options: Option 1: purchase the motors for the appliance from a vendor at $5 each; Option 2: produce them in house using technology A with an annual fixed cost of $78000 and a variable cost of $3 per unit; or Option 3: produce them in house using technology B with an annual fixed cost of $40000 and a variable cost of $6 per unit.

Required:

Question 1) The range of output for which Option 1 is best is _____ units.

Question 2) The range of output for which Option 2 is best is _____ units.

Question 3) The range of output for which Option 3 is best is _____ units.

Solve the problem and show all work.

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91149064

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