It costs $1 billion to build a new fabrication facility. You will be selling a range of chips from that factory, and you need to decide how much capacity to dedicate to each chip. Your Woods chip will be 150 mm2 and will make a profit of $20 per defect-free chip. Your Markon chip will be 250 mm2 and will make a profit of $25 per defect free chip. Your fabrication facility will be identical to that for the Power5. Each wafer has a 300 mm diameter.

a. How much profit do you make on each wafer of Woods chip?

b. How much profit do you make on each wafer of Markon chip?

c. Which chip should you produce in this facility?

d. What is the profit on each new Power5 chip? If your demand is 50,000 Woods chips per month and 25,000 Markon chips per month, and your facility can fabricate 150 wafers a month, how many wafers should you make of each chip?