Long Island Commissary produces meals that are ready to eat by just adding water. These meals are purchased mostly by the military for use when personnel are not close to kitchens and by backpackers. The meals are produced in three stages:
Preparation, Cooking, and Packaging. As shown below, there is a bottleneck in the Packaging stage.

Each €˜€˜unit€™€™ refers to a container of 120 meals. Each unit sells for $240 and has a variable cost of $110.
Option a. Long Island Commissary can subcontract 80 units of packaging to an outside firm, thereby increasing Packaging output to a total of 880 units per day. This option would cost $8,000.
Option b. Long Island Commissary can increase Packaging output by 50 units by renting equipment at a cost of $4,000 per day.
Long Island can take either or both options as presented. What do yourecommend?

Transcribed Image Text:

Cooking 900 units 800 units Packaging 800 units 800 units Preparation Daily Caycy Actual Daily Production 800 units