Answer:
a. If demand for Bob's candles is 2500, which option should he pick?
and what is the cost?
b. If demand for Bob's candles is 4500 which option should he $19,950
and what is the cost?
Explanation:
Option A uses hand labor with fixed costs of $10,000 and variable costs of $2.75/candle.
Option B uses a combination of hand and automation with fixed costs of $15,000 and variable costs of $1.10/candle.
Option C is highly automated with fixed costs of $20,000 and variable costs of $0.75/candle.
demand = 2,500 units
option A = $10,000 + ($2.75 x 2,500) = $16,875
option B = $15,000 + ($1.10 x 2,500) = $17,750
option C = $20,000 + ($0.75 x 2,500) = $21,875
demand = 4,500 units
option A = $10,000 + ($2.75 x 4,500) = $22,375
option B = $15,000 + ($1.10 x 4,500) = $19,950
option C = $20,000 + ($0.75 x 4,500) = $23,375
