# Decision Analysis A product may be made by Machine I or Machine II....

## Question

Decision Analysis A product may be made by Machine I or Machine II. The manufacturer estimates that the monthly fixed costs of using Machine I are \$18,000, whereas the monthly fixed costs of using Machine II are \$15,000. The variable costs of manufacturing 1unit of the product using Machine I and Machine II are \$15 and \$20 respectively. The product sells for \$50 each.

a. Fine the cost functions associated with using each machine

c. Which machine should management choose in order to maximize their profit if the projected sales are 450 units? 550 units? 650 units?

d. What is the profit for each case in part (c)?

## Solution Preview

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(a) Suppose Machine I and Machine II produce x and y respectively.
For Machine I

Cost Price = 15x + 18000 ...

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