Capacity of a bottleneck operation by adding new machine

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A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $14,000 for A and $9,000 for B; variable costs per unit would be $10 for A and $11 for B; and revenue per unit would be $14. For what range of demand will Alternative B be profitable and be a better option than Alternative A?

Reference no: EM131034521

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