How many machines should the manager purchase


Solve the below problem:

Q: A manager has the option of purchasing one, two, or three machines. Fixed costs and potential volumes are as follows:

Number              Total Annual               Corresponding

of machines        Fixed Costs               Range of Output

1                       $ 9 600                          0 to 300

2                      $ 15 000                      301 to 600

3                      $ 20 000                      601 to 900

The variable cost if we operate only 1 machine is $10 per unit, but due to economies of scale it decreases to 9$ and 8$ if we operate together 2 and 3 machines, respectively. The price sold per item is $40.

Help the manager determine break-even point for each range. If projected annual demand is between 580 and 660 units, how many machines should the manager purchase?

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