A construction item has an annual demand of 100,000 units and are sold for $0.85 each. Two alternative designs are under consideration for the manufacture of this item. Either design will serve equally well and will involve the same material and manufacturing cost except for the lathe and drill operations. Design A will require 7 hours of lathe time and 8 hours of drill time per 1.000 units. Design B will require 12 hours of lathe time and 5 hours of drill time per 1.000 units. The variable operating cost of the lathe, including labor. is $19.60 per hour. The variable operating cost of the drill, including labor, is $17.90 per hour.