Purchase of a new lathe, demand uncertainty. (A. Atkinson) The manager of operations at Purcell's Cove Machine Shop is considering leasing equipment for a new flexible man- ufacturing system (FMS) to replace existing equipment. The FMS lease will increase annual fixed costs by $900,000 per year and will reduce variable costs by $800 per job.

The manager believes that the annual number of jobs processed by the company will be 900, 1,200, or 1,500. The probabilities of these events occurring are:

Annual Number of Jobs Probability 900 0.25 1,200 0.45 1,500 0.30 1.00 Required Should the compa w lea e the FMS? Supj. vour conclusion with appropriate calculations.