Company to lease this equipment for either types of hats

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Reference no: EM132302309

Company B produces two types of cowboy hats. Type 1 requires twice as much labor as Type 2. If all the available labor time is spent on Type 2 alone, the company can produce a total of 400 hats (of Type 2) per day. The company can sell at most 150 hats of Type 1 and 200 hats of Type 2 per day. The profit is $8 per Type 1 hat and $5 per Type 2 hat. Suppose the company can lease special equipment to boost the production capabilities. The equipment is different for the two types of hats. If Type 1 hat equipment is leased, the labor time for Type 1 hats is reduced in half; and if Type 2 hat equipment is leased, the labor time 2 for Type 2 is reduced in half. The equipment monthly cost is $3,000 for Type 1 and $2,000 for Type 2. Does it make sense for the company to lease this equipment for either (or maybe both) types of hats?

Reference no: EM132302309

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