SITUATION: A company is about to begin production of a new product. The manager of the department that will produce one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units will be used daily in assembling the final product. Assembly will take place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at the cost of $300. Inventory holding costs will be $10 a year.

QUESTION: Suppose the manager decides to increase the run size of the new product. How many additional units would be needed just to accommodate the other job? How much will that increase the total annual cost?