APICS CPIM-8.0 Exam - Topic 7 Question 15 Discussion

To maximize profit, the manufacturer should choose the machine that has the lowest total cost per unit of demand. The total cost per unit of demand is calculated by adding the fixed cost per unit of demand and the variable cost per unit. The fixed cost per unit of demand is obtained by dividing the fixed cost by the annual demand. The variable cost per unit is given in the table. The total cost per unit of demand for each machine is:

Machine A: 1,000,000100,000+6.00=6.10

Machine B: 1,000,000200,000+5.50=5.70

Machine C: 1,000,000250,000+5.00=5.25

Machine D: 1,000,0001,000,000+4.50=5.50

The lowest total cost per unit of demand is for Machine C, which is $5.25. Therefore, Machine C will maximize the profit for the manufacturer.

Some possible references for this question are:

CPIM Part 1 Exam Content Manual, Version 8.0, Domain 3: Plan and Manage Supply, Section A: Plan and Manage Supply Chain Capacity, Topic 2: Capacity Planning Concepts, Subtopic b: Capacity planning methods, Page 30

CPIM Part 1 Learning System, Version 8.0, Module 3: Plan and Manage Supply, Section 3.2: Capacity Planning Concepts, Topic 3.2.2: Capacity Planning Methods, Subtopic 3.2.2.2: Cost-Volume Analysis, Pages 3-24 to 3-26

CPIM Part 1 Study Guide, Version 8.0, Module 3: Plan and Manage Supply, Section 3.2: Capacity Planning Concepts, Topic 3.2.2: Capacity Planning Methods, Subtopic 3.2.2.2: Cost-Volume Analysis, Pages 3-24 to 3-26