Question: Kayo Computer assembles and sells personal computers. Each computer needs one custom-designed printed circuit board (PCB). Kayo has contracted to buy the PCBs from an

Kayo Computer assembles and sells personal computers. Each computer needs one custom-designed printed circuit board (PCB). Kayo has contracted to buy the PCBs from an outside PCB manufacturer, Apex Manufacturing. The one-year contract stipulates that Kayo pays 200 per board to Apex for up to 2,000 PCBs. If the annual order quantity exceeds 2,000 PCBs, then Apex is obligated to give a discount of $40 per board for the portion beyond 2,000, thus selling them at $160. Kayo can also buy the same PCBs from another manufacturer, TCI Electronics, that offers a lower price of $120 per PCB but asks a one time payment of $100,000 as a nonrefundable design and engineering fee. Kayo

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