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Unformatted text preview: = $ 860 Drilling 3: Total Cost / 150 Units: $70 + [(150 units)/(8 units/hr)] ( $8/hr + $20/hr + $14/hr) = $ 857,5 Result : Since Drilling 3 gives the total least cost for 150 units of products, the company has to decide to purchase this machine. Question 2: The contract of Consultant The current production capacity: 3000 unit/month The price of product is a function of demand which is described by P=120-0.01D, where D is the monthly demand. In current market conditions, the company can sell what it produces. The total variable cost is $30 per unit. The set up (fixed) cost is $7000. The company can hire a consultant who can increase the production capacity at a rate of %4 per month. To maximize the monthly profit of the company, what should be the length of contract with the consultant? Solution Profit=D(120-0.01D)-30D-7000 month unit D D / 4500 02 . 90 30 02 . 120 D profit = = =--= 34 . 10 04 . 1 * 3000 4500 = = n n...
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- Fall '12