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Merton s production manager suggests purchasing Model 1 0 1 or Model 1 0 2 engines from an outside supplier in order to relieve the
Mertons production manager suggests purchasing Model or Model engines from an outside supplier in order to relieve the capacity problem in the engine assembly department. If Merton decides to pursue this alternative, it will be effectively renting capacity: furnishing the necessary materials and engine components, and reimbursing the outside supplier for labor an overhead.
What is the maximum rent it should be willing to pay for a machinehour of engine capacity?
What is the maximum number of machinehours it should rent?
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