Two Machines Are Under Consideration for a New Production Line

question 4

Short Answer

Two machines are under consideration for a new production line. Machine X costs $50,000 and is expected to have a salvage value of $6500 at the end of its useful life of 5 years. It will have a fixed cost of $16,000 per year and a variable cost of $55 per unit per year. On the other hand, machine Y costs $55,000 and is expected to have a salvage value of $7000 at the end of its useful life of 7 years. It will have a fixed cost of $14,500 per year and a variable cost of $58 per unit per year. Determine the quantity that must be produced for the two machines to break even at an interest rate of 3% per year.

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Definitions:

Reinforcing

In behavioral psychology, refers to any consequence that strengthens or increases the likelihood of a behavior being repeated.

Partial Reinforcement

A conditioning schedule in which a reward is not administered every time the desired behavior is performed, leading to more resistant behavioral patterns.

Negative Reinforcement

A process in behaviorism where a response or behavior is strengthened because a negative condition is removed or avoided.

Continuous Reinforcement

a method of learning where a behavior is reinforced (rewarded) every time it occurs, facilitating quick acquisition of the behavior.