makes widgets. Orders are filled as they come in. Orders range in size from 1-20

Question

makes widgets. Orders are filled as they come in. Orders range in size from 1-200 widgets. An analysis of production cost reveals the following data for three different widget making tools. Each tool option has a fixed cost, and a per unit cost. toolingfixed cost per unit cost M1 $9 $3 $5 $300 M2 $750 M3$500 what is the maximumorder size where tool M1 should be chosen? (33.33 What is the minimum order size tool M2 should be chosen for? 101 Cole Co. receives an order for 195 Widgets the best tool option is out for repair, so the second best option must be chosen. How much extra will it cost to process the order? $ 1475

Explanation / Answer

(300+9Q)/Q<(750+3Q)/Q

Q<45

For M2 to choose

(750+3Q)/Q<(500+5Q)/Q

Q<125 (mAximum Order to be processed is 125 with M2)

Above 125 we have to choose M3

hence cost with Q=195

195*5+500=1475

and with M2 the cost will be 750+3*195=1335

Hence additional cost of 140 to be incurred.

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