1. Which of the support cost functions would you expect to be the most reliable for explaining and predicting support? Why?
2. Assume that American Micro Devices prices its products by adding a percentage markup to its product costs. Products costs include assembly labor, components, and support costs. Using each of the cost functions, compute the circuit board portion of the support cost of an order that used the following resources:
a. Effectively used the capacity of the assembly department for 3 weeks
b. Assembly labor hours: 20,000
c. Number of boards: 6000
d. Average cycle time:180 hours
3. Which driver would you recommend that Americans Micro Devices use? Why?
4. Assume that the market for this product is extremely cost competitive. What do you think of American Micro Device's pricing method?