13.Durango Castings, mentioned in problem 12, has a lower-capacity machine that will make the pump housing at a rate of 1,600 per week. It cost only $140 to set up this machine, but it is estimated that each unit produced by it will cost approximately

$21.60. Since the pump housing contract will require most of the capacity of this lower-capacity machine, it has been decided that if the housings are run on this machine, the machine will be dedicated to the contract so the setup cost will be paid only once for the 3-year contract. As in problem 12, the holding cost is 24 percent per year. .

a. Determine the total annual cost of setup and additional production cost, and compare it to the costs found for problem 12.

b. What other factors should be considered?

c. Is this machine a lower-cost option than the high-capacity machine?