The Advanced Engineering Economic Company ('AEE') is currently making its product (MEM502) in a process-focused shop, where rental payments are $8000 per year and material costs are $40 per unit. Records show that AEE currently sells 200 units of the product MEM502 for $200 each. As the manager of AEE, you are considering a proposed repetitive focus in order to lowest costs, and hence, lower prices; thereby raising the demand. the proposed shop however, has rental payments of $24,000 per year and material costs of $10 per unit.

a) Formulate the total cost and profit function for AEE (show full solution)

b) if a price of $80 will allow 400 units to be sold, using the Analytical method, determine what profit(or loss) the proposed new process can generate. (show full solution)

C) determine the new break-even quantity and total cost using the graphical method.

d) as the manger of AEE, would you change the process? Explain why