Question -

A certain product is being made by hand in a small factory. The workers were paid $0.20 per acceptable piece produced. It was found that if a worker produced 80 pieces per day, 5% would be rejected. If 90 pieces were produced per day, 10% would be rejected, and at the rate of 100 pieces, 20% would be rejected. The cost of materials was $0.50 per piece, and the materials in any rejected piece had to be thrown away. There was a fixed overhead expense of $10.00 per day per worker, regardless of considerable change in output.

a) At which of the three outputs did the worker make the highest wage?

b) At what output did the factory achieve the lowest unit cost?