1. [USE EXCEL]A company must decide which machine to buy, and how many units of that type, given the following information:

Machine Type	Purchasing Cost/Machine
1	$10,000
2	$14,000

Product	Annual Demand (units)	Process Time per Unit on Type 1 (min.)	Process Time per Unit on Type 2 (min.)
001	12,000	4	6
002	10,000	9	9
003	18,000	5	3

1. How many machines of each type would be required to handle demand if the machines will operate 8 hours per day, 250 days per year, and what annual capacity cushion in processing time would result for each?

2. With high certainty of demand, which type of machine would be chosen if that was an important consideration? With low certainty, which type of machine would be chosen?

3. If purchasing and operating costs are taken into account, which type of machine would minimize total costs, given your answer in part a? [Data: Operating costs are $6/hr for type 1 and $5/hr. for type 2].

2. [USE EXCEL]Gallant Carpet Cleaning cannot meet demand with its current equipment. Gallant Carpet Cleaning is considering two new carpet cleaning machines. Machine A cleans carpets to residential standards, while machine B cleans and sanitizes carpets to hospital standards. Machine A costs $20,000 and machine B costs $50,000. The company estimates its cost per cleaning (including all chemicals) for machine A will be $8 and machine B will be $7. The revenue per carpet cleaned for A would be $40, while B could bring in $45 per carpet, due to the higher degree of sanitation provided.

1. Complete the table below for the data as well as equations (using Q) for Total cost (TC), Total Revenue (TR) and Profit (Pr).

# of Carpets cleaned = Q	Machine A	Machine B
FC
v= Variable cos1/unit
Selling price =R
TC
TR
Profit (Pr)
Break-Even Q

2. Machine B needs to clean how many more carpets than machine A to break even?

3. Plot the Profit graphs (on same graph) for each machine type. From your graph, recommend over what range of more carpet cleaning demand (Q) which machine type will be preferred.