'v'ariable overhead roots of DL$} Fixed overhead {25% of DUB} Donovan argues that this job should also bear a proportion of administrative costs; she suggests $1 aooc. a} Buy a special purpose machine: The advantage of this special purpose machine is that only one operator is required and output per hour could increase by 25%. in addition, maintenance costs are signicantly reduced because microchip circuitry is employed. Connor points out that this machine is statecf-the-art and would probably mean that new work could be taken on. A numerically controlled machine required extensive training of operators. In total, 26 weeks are spent in the supplier's factory located in Florida. 1llillhile the training is going on, the supplier provides an operator to work the machine without charge. Expected costs of this training period including hotel, per diem, and travel will cost $3,[li.'l per week, excluding the operator's labor which is set at $15 per hour. The machine costs $625,00U, and the supplier guarantees the salvage value of $25,!'Zl at the end of ve years. It is available immediately. It is estimated the machine can generate sales of $243333 annually at full capacity and require $19,5IJD in direct materials cost, which is equivalent to the general purpose machine. a} Buy a general purpose machine: The purchase price of this machine is $295, and cost levels associated with the machine are expected to be the same as the general purpose machine built by the company because the technology is similar. The salvage value of the machine net of removal costs, is estimated to be $5,0El in ve years. It can be delivered immediately. General comments: The required rate of return for this investment class has been set at 3% by havin Thompson