A manager must decide which type of machine to buy A B or C Machine costs are as follows

QUESTION:

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 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?


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