An operations manager, to increase the capacity of his manufacturing plant, decides to buy an additional machine. He has three alternatives: Machine I at a cost of $60,000; Machine II at a cost of $40,000; or Machine III at a cost of $100,000 (all in U.S. dollars). Annual demand forecasts for the four products that will use this machine and the processing times for the three types of machines are given in the following table:

1. Considering only the purchase cost of these machines, which machine, and how many of that machine type should the operations manager buy? Assume the plant operates 8 hours a day and 300 days a year.

2. In addition to the purchase cost of the machines, the operations manager needs to consider the hourly operating cost of these machine, which are given as follows:

Machine I: $12 an hour; Machine II: $14 an hour; and Machine III: $15 an hour.

To satisfy capacity processing requirements and to minimize total purchasing and operating costs, which type of machine, and how many should the operations manager buy?

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Processing Time Demand (in minutes per unit) Forecast (in units) Machine I| Machine III Product Machinel 4 20,000 3 4 14,000 4 8,000 36.000 3.