The particular logarithmic function proposed in Example 12.4 is just one possibility for the cost of a setup cost reduction. Referring to the previous problem, suppose instead that Machey’s has only three possibilities. The company can either leave the setup cost as it is, spend C1 dollars to reduce the setup cost to $100, or spend C2 dollars to reduce it to $75.

Analyze these possibilities for various values of C1 and C2 to see which is optimal in terms of total annual cost.