3. A supermarket chain buys loaves of bread from its supplier at $0.50 per loaf. The chain is considering two options to bake its own bread. Machine A Machine B Capital investment Useful life (years) Annual fixed cost $8,000 7 $16,000 $2,000 $0.26 $4,000 S0.16 Variable cost per loaf Neither machine has a market value at the end of seven years, and MARR is 12% per year. What is the minimum number of loaves that must be sold per year to justify installing Machine A instead of buying the loaves from the supplier? b. What is the minimum number of loaves that must be sold per year to justify installing а. Machine B instead of buying the loaves from the supplier? If the demand for bread at this supermarket is 35,000 loaves per year, what strategy should be adopted for acquiring bread? Both Machine A and Machine B are capable of meeting annual demand. The strategies are as follows: i) Continue buying from the supplier. (ii) Install Machine A. (iii) Install Machine B. (iv) Install both Machine A and Machine B.

3. A supermarket chain buys loaves of bread from its supplier at $0.50 per loaf. The chain is considering two options to bake its own bread. Machine A Machine B Capital investment Useful life (years) Annual fixed cost $8,000 7 $16,000 $2,000 $0.26 $4,000 S0.16 Variable cost per loaf Neither machine has a market value at the end of seven years, and MARR is 12% per year. What is the minimum number of loaves that must be sold per year to justify installing Machine A instead of buying the loaves from the supplier? b. What is the minimum number of loaves that must be sold per year to justify installing а. Machine B instead of buying the loaves from the supplier? If the demand for bread at this supermarket is 35,000 loaves per year, what strategy should be adopted for acquiring bread? Both Machine A and Machine B are capable of meeting annual demand. The strategies are as follows: i) Continue buying from the supplier. (ii) Install Machine A. (iii) Install Machine B. (iv) Install both Machine A and Machine B.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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