How many machines should the manager purchase

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Reference no: EM131856994

A manager has the option of purchasing one, two, or three machines. Fixed costs and potential volumes are as follows:

Number of machines	Total annual fixes costs	Corresponding range of output
1	$9,600	0 to 300
2	$15,000	301 to 600
3	$20,000	601 to 900

The variable cost if we operate only 1 machine is $10 per unit, but due to economies of scale it decreases to 9$ and 8$ if we operate together 2 and 3 machines, respectively. The price sold per item is $40.

Help the manager determine break-even point for each range. If projected annual demand is between 580 and 660 units, how many machines should the manager purchase?

Reference no: EM131856994

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