Reference no: EM132754390

Boyd Tool Company is a tool manufacturer. Production capacity is 3,000 units per month; however, they are considering alternative ways to increase capacity to 3,500 units. One of the alternatives involves purchasing new equipment. In this alternative, there are two choices: machine A will provide increased capacity of 4,000 units per month, with unit costs of $14 at capacity; and, machine B will increase capacity to 3,600 units per month with unit costs of $15 at capacity. Both machines are adequate since Boyd's does not intend to go beyond the 3,500 units per month level for the foreseeable future.

Problem 1: Relevant information for this decision includes

1) whether other costs will change solely due to a capacity increase.

2) the different unit cost of production between the two machine at their capacity levels.

3) Boyd's planned capacity utilization.

4) excess capacity of either machine.

5) the different unit cost of production between the two machines at Boyd's planned capacity levels.