A manager must decide which type of machine to buy, A, B, or C. Machine fixed costs are:

Machine                 Cost/Year

A…………………………..$40,000

B…………………………..$30,000

C…………………………..$60,000

The company makes four products. Product forecasts and unit processing times on each machine are as follows:

a. How many machines of each type would be needed in order to meet annual demand for all the products? Based on annual fixed costs, which type of machine and how many will cost least to satisfy the demand? Machines operate 10 hours a day, 250 days a year.
b. Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $10 each, B machines have an hourly operating cost of $ 11 each, and C machines have an hourly operating cost of $ 12 each. Which alternative machine should be selected, and how many would be necessary to minimize total cost while satisfying processing requirements?

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Annual Demand 16,000 12,000 6,000 30,000 Por Unit (Minutes) AB 3 4 Product Anssing Time 2 3 4 4