A tennis racquet manufacturer is negotiating a lease on land to build a manufacturing plant. The price p charged per tennis racquet will be determined by p = $450 - (0.1) d, where d is the demand quantity. The manufacturer faces variable costs of $25 per tennis racquet. Fixed costs of manufacturing are currently $25,000, in addition to the value of the lease per month being negotiated.

(a) For this situation, determine the optimal monthly order volume for this product? (7 marks)

(b) How high can the lease be in order for the firm to make a positive profit? (8 marks)

(c) You are asked to estimate the per unit cost of a new line of tennis racquet. Past experience has shown that an 80% learning curve applies to the labor required for producing these items. The time to complete the first item has been estimated to be 1.76 hours. How long will it take to complete the 50th? (10 marks)

Rubrics and Marking: Marks will be given by considering the logical discussions provided, and whether the final solutions (i.e. numbers) are correct. You will get the points if your answers are logical with supporting discussions and/or supporting facts.