Question
Dulce Leite Company produces three products with the following information: Dulce Leite Company has a limit of 14,300 machine-hours available per month and a monthly
Dulce Leite Company produces three products with the following information:
Dulce Leite Company has a limit of 14,300 machine-hours available per month and a monthly fixed cost of $14,000.
The demand for each of the products is 2,500 units per month.
The company's goal is to maximize its profitability.
Suppose the Dulce Leite Company can rent a machine that will provide an additional 1,210 machine-hours per month.
a) What is the maximum monthly rent the Dulce Leite Company should be willing to pay for this machine (assuming they've made optimal use of their own machine)?
\begin{tabular}{|c||c|c|c|} \hline & \multicolumn{3}{|c|}{ Product } \\ \hline & Small & Medium & Large \\ \hline Selling price per unit & $17 & $19 & $26 \\ \hline Variable cost per unit & $8 & $10 & $12 \\ \hline Machine-hours per unit (MH/unit) & 2 & 3 & 4 \\ \hline \end{tabular}Step by Step Solution
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