Asked by Ashley Bull Calf on Jun 23, 2024
Verified
Mary is considering purchasing a machine from two suppliers. Supplier A's machine has an annual fixed cost of $10,000 and a unit variable cost of $2.10. Supplier B's machine has an annual fixed cost of $16,000 and a unit variable cost of $3.00. How large should Mary's annual demand be in order to make Supplier B's machine the better choice?
Annual Demand
The total quantity of a product or service that is expected to be sold or used in one year.
Fixed Cost
Costs that remain consistent regardless of the amount of goods produced or sold, including expenses like rent, wages, and insurance premiums.
Unit Variable Cost
The cost associated with producing one additional unit of product, not including fixed costs.
- Evaluate the position at which two varied manufacturing operations or machines match in efficiency.
- Establish the most budget-friendly process design for given demand quantities.
Verified Answer
VL
Vanessa LaCasciaJun 28, 2024
Final Answer :
The answer is that there is no demand for which Supplier B's machine will be better. Both Supplier B's fixed and variable costs are higher than Supplier A's.
Learning Objectives
- Evaluate the position at which two varied manufacturing operations or machines match in efficiency.
- Establish the most budget-friendly process design for given demand quantities.