A manufacturer has a forecasted annual demand of 1,000,000 units for a new product. They have to choose 1 of 4 new pieces of equipment to produce this product. Assume that revenue will be $10 per unit for all 4 options.
Which machine will maximize their profit if the manufacturer anticipates market demand will be steady for 3 years and there is no residual value for any of the equipment choices?
MachineFixed CostVariable Cost per UnitAnnual Capacity
AS100.000$6 00800,000 units
B$200,000$5 501.000,000 units
C$250,000$5 001,200,000 units
D$1 000.000$4 501 400.000 units