Clarke Corporation manufactures three products (X-1, X-2, and X-3) utilizing, in one of the processes, a single machine for all products. Data on the individual products follow.

	X-1			X-2			X-3
Price per unit	$	100		$	200		$	400
Variable cost per unit	$	50		$	120		$	240
Machine hours per unit		1.0			2.5			4.0
Maximum units demand per period		300,000			150,000			20,000

The single machine used for all three products has a maximum capacity of 500,000 hours per period.

Required:

a. A local engineering firm claims it can revise the production process such that product X-2 only requires 1.6 machine hours on the shared machine. How much would Clarke be willing to pay per period for the new process?

b. Suppose, instead, that the local engineering firm can revise the production process such that Product X-3 only requires 3.5 machine hours on the shared machine. (Product X-2 requires 2.5 machine hours as in Problem 4-75.) How much would Clarke be willing to pay per period for the new process?