Answered: Cutting Tool ID Fixed Cost per Order…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 1.1CE

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Question

Cowboy Metal Cutting produces a laser cut part based on customer orders. The number of units requested on a customer’s order for the laser cut part can vary from 1 unit to 150 units. Cowboy has determined that three different cutting machines can be used to produce this part. An economic analysis of production costs has produced the data in the table below. Solve, a. For all order sizes between 1 and 150, determine the preferred (most economical) cutting machine for an order of that size. b. For an order of size 75, what is the minimum cost production?

Cutting Tool ID Fixed Cost per Order Variable Cost per Unit
СТ 1
$300
$9.00
СТ 2
$750
$3.00
СТ 3
$500
$5.00

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