Sandstone Corporation has one of its manufacturing plants operating on a single shift 5-day week. The plant is operating at its full capacity (24,000 units of output per week) without the use of overtime or extra-shift operation. Fixed costs for single-shift operation amount to $90,000 per week. The average variable cost is a constant $30 per unit, at all output rates, up to 24,000 units per week. The company has received an order to produce extra units per week beyond the current single-shift maximum capacity.Two options are being considered to fill the new order.

Option 1: Increase the plant's output (with max output 36,000 units a week) by adding overtime or by adding Saturday operations or both. No increase in fixed costs is entailed, but the variable cost is $36 per unit for any output in excess of 24,000 units per week, up to a 36,000-unit capacity.

Option 2: Operate a second shift. The maximum capacity of the second shift is 21,000 units per week. The variable cost on the second shift is $31.50 per unit, and operation of a second shift has additional fixed costs of $13,500 per week.

a.If the additional demand is 4,000 units which option will you choose?

b.If the exact additional demand is not known determine the range of operating output that makes Option 2 the preferred option.