Reference no: EM132560359

A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows:

Machine Cost A $ 70,000 B $ 60,000 C $ 50,000

Product forecasts and processing times on the machines are as follows:

PROCCESSING TIME PER UNIT (minutes)

Product Annual

                        Demand               A                  B                   C

1                          11,000               5               1              2

2                             24,000             5               6               2

3                               26,000               2             4                 5

4                                22,000                    1        6                    3

Question a. Assume that only purchasing costs are being considered. Compute the total processing time required for each machine type to meet demand, how many of each machine type would be needed, and the resulting total purchasing cost for each machine type. The machines will operate 8 hours a day, 240 days a year.

Question b. Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $13 each, B machines have an hourly operating cost of $11 each, and C machines have an hourly operating cost of $10 each. What would be the total cost associated with each machine option, including both the initial purchasing cost and the annual operating cost incurred to satisfy demand?