A firm plans to begin production of a new small appliance. The manager has three options:
Option 1: purchase the motors for the appliance from a vendor at $8 each;
Option 2: produce them in house using technology A with an annual fixed cost of $95000 and a variable cost of $2 per unit; or
Option 3: produce them in house using technology B with an annual fixed cost of $180000 and a variable cost of $5 per unit.