Problem 2 (4 marks) Talib must decide whether to have one or two machines for tailoring One machine will mean a fixed cost of $6000 a month, and the two machines will mean a fixed cost of $10,500 a month Variable costs involved are $3 per piece, and revenue will be $5 95 per piece If the first month demand is 5000 pieces, how much will the profit be from using each of the options (i) one machine (ii) two machines Talib projects an average demand of between 14 to 18 pieces per hour Each machine can process 15 pieces an hour Would you recommend one or two machines to Talib Justify your answer

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Question: Problem 2 (4 marks) Talib must decide whether to have one or two machines for tailoring. One machine will mean a fixed cost of $6000

Problem 2 (4 marks)

Talib must decide whether to have one or two machines for tailoring. One machine will mean a fixed cost of $6000 a month, and the two machines will mean a fixed cost of $10,500 a month. Variable costs involved are $3 per piece, and revenue will be $5.95 per piece.

If the first month demand is 5000 pieces, how much will the profit be from using each of the options- (i) one machine; (ii) two machines.
Talib projects an average demand of between 14 to 18 pieces per hour. Each machine can process 15 pieces an hour. Would you recommend one or two machines to Talib? Justify your answer.

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