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1. Problem 5-8
A manager is trying to decide whether to purchase a certain part or to have it produced internally.
Internal production could use either of two processes. One would entail a variable cost of $17 per
unit and an annual fixed cost of $200,000; the other would entail a variable cost of $14 per unit
and an annual fixed cost of $240,000. Three vendors are willing to provide the part. Vendor A
has a price of $20 per unit for any volume up to its maximum capacity of 30,000 units. Vendor B
has a price of $22 per unit for demand less than 1,000 units, and $18 per unit for larger
quantities. Vendor C offers a price of $21 per unit for the first 1,000 units, and $19 per unit for
additional units.
If the manager anticipates an annual volume of 10,000 units, which alternative would be best
from a cost standpoint? For 20,000 units, which alternative would be best? (Omit the "$" sign in
your response.)
2. Problem 5-9
A company manufactures a product using two machine cells. Each cell has a design
capacity of 250 units per day and an effective capacity of 230 units per day. At present,
actual output averages 200 units per cell, but the manager estimates that productivity
improvements soon will increase output to 221 units per day. Annual demand is currently
50,000 units. It is forecasted that within two years, annual demand will triple. How many
cells should the company plan to acquire to satisfy predicted demand under these
conditions? Assume 242 workdays per year. (Round up your answer to the next whole
number.)
3. Problem 5-11