A Shop Wants to Increase Capacity by Adding a New

question 3

Multiple Choice

A shop wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The revenue generated by the units processed on these machines is $22 per unit. If the estimated output is 9,000 units, which machine should be purchased?

• A) machine A
• B) machine B
• C) either machine A or machine B
• D) no purchase because neither machine yields a profit at that volume
• E) purchase both machines since they are both profitable

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Definitions:

E-Business Management

The practice of using digital technologies to conduct business processes, including buying, selling, and providing customer service online.

Competitive Advantage

The attribute that allows an organization to outperform its competitors, including factors like superior quality, cost leadership, or innovative capabilities.

Factory System

An organizational method for manufacturing that involves workers and machinery in one location to produce goods on a large scale.