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Mvomero Company must choose between one of two machines. Machine A has low fixed costs and high unit variable costs whereas machine B has high
Mvomero Company must choose between one of two machines. Machine A has low fixed costs and high unit variable costs whereas machine B has high fixed costs and low unit variable cost. Consequently, machine A is most suited to low level demand whereas machine B is suited to a high-level demand. The estimated profitability for each demand level is as follows:
State of nature | Alternative | |
Machine A | Machine B | |
Low demand | 100,000 | 10,000 |
High demand | 160,000 | 200,000 |
Required: Use the possible decision rules to advice the management of Mvomero Company.
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