Changes in total production cost per hour

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A recent engineering graduate was given a job of determining the best production rate for a new type of casting in the foundry. After experimenting with many combinations of hourly production rates and total production cost per hour, he summarized his findings.

Total cost/hour ($) 1,000 2,600 3,200 3,900 4,700

Casting produced per hour 100 200 300 400 500

The engineer then talked to the firm's marketing specialist, who provided these estimates of selling price per casting as a function of production output:

Casting produced per hour 100 200 300 400 500

Selling price per casting 20 17 16 15 14

  1. What production rate would you recommend to maximize total profits?
  2. How sensitive is the rate in part (a) to changes in total production cost per hour?

Reference no: EM132637207

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