A company's production facility, consisting of two identical machines, currently caters only to product A. The annual demand for the product is 4000 units. Management has now decided to introduce another product, B, which uses the same facilities as that of product A. Product B has an annual demand of 2000 units. In view of the uncertainties involved in producing two products, management desires to have an overall 10 percent capacity cushion. Given the following additional information, how many more machines are required? (Assume 8 hours/shift, 2 shifts/day, 250 days/year, and that no overtime is allowed).
A. No additional machines are necessary.
B. One additional machine is necessary.
C. Two additional machines are necessary.
D. More than two additional machines are necessary.
Answer:C
A company's production facility, consisting of two identical machines, currently caters only to product A. The annual demand for the product is 4000 units. Management has now decided to introduce another product, B, which uses the same facilities as that of product A. Product B has an annual demand of 2000 units. In view of the uncertainties involved in producing two products, management desires to have an overall 10 percent capacity cushion. Given the following additional information, how many more machines are required? (Assume 8 hours/shift, 2 shifts/day, 250 days/year, and that no overtime is allowed).
A. No additional machines are necessary. B. One additional machine is necessary. C. Two additional machines are necessary. D. More than two additional machines are necessary.