1. Suppose a manufacturer has identified the following options for obtaining a machined part: It can buy the part at $200 per unit (including materials); it can make the part on a numerically controlled semiautomatic lathe at $75 per unit (including materials); or it can make the part on a machining center at $15 per unit (including materials). There is negligible fixed cost if the item is purchased; a semiau- tomatic lathe costs $80,000; and a machining center costs $200,000. The total cost for each option is

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Purchase cost = $200 Demand Produce-using-lathe cost = $80,000 +$75 Demand Produce-using-machining-center cost = $200,000 +$15 Demand