Bob, s candle factory is considering three different manufacturing options. 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. 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 , and what is the cost? pick?

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

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