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Operations and Supply Management

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Assume that you are offered a new piece of equipment for $10000. The equipment will produce 10,000 units per year with a margin of $6.00 per unit. Demand for the product being produced has been 2000 units per year. Your current equipment is fully depreciated and can produce the 2000 units per year but at a margin of only $4.00 per unit. Should you purchase the new equipment? Under what conditions?

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Production
$10,000 x 6. = $60,000.
Price of new equipment-$10,000.
Straight line depreciation for new equipment
1 .20 x$10,000 = $2,000
2 .20 x $8000 = ...

Solution Summary

This solution discusses an operation supply management problem.

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