A manager must decide which type of machine to buy, A, B, or C. Machine costs are as follows:
Machine Cost
A ......... $ 40,000
B ......... $ 30,000
C ......... $ 80,000
Product forecasts and processing times on the machines are as follows:
a. Assume that only purchasing costs are being considered. Which machine would have the lowest total cost, and how many of that machine would be needed? Machines operate 10 hours a day, 250 days a year.
b. Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $ 10 each, B machines have an hourly operating cost of $ 11 each, and C machines have an hourly operating cost of $ 12 each. Which alternative would be selected, and how many machines, in order to minimize total cost while satisfying capacity processing requirements?