Question
A fabrication company wants to increase capacity by adding a new machine. The firm considers proposals from vendor A (selling machine A) and vendor B
A fabrication company wants to increase capacity by adding a new machine. The firm considers proposals from vendor A (selling machine A) and vendor B (selling machine B). The fixed costs for machine A and machine B are $90,000 and $75,000, respectively. The variable cost for machine A is $15/unit, and for the machine, B is $16/unit. The revenue generated on these machines is $21/unit. If the estimated output is 16,000 units, would you recommend that the company increases its capacity? If your answer is "YES", which machine should be purchased and why? If your answer is "NO", explain why not?
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