Optimal Input Level

Essay

Optimal Input Level. Laboratory Testing, Inc., provides routine drug tests for employers in the Los Angeles metropolitan area. Tests are supervised by skilled technicians using equipment produced by two leading competitors in the medical equipment industry. Records for the current year show an average of 24 tests per hour performed on the A-1, and 51 tests per hour on a new machine, the Caltec. The A-1 is leased for $16,000 per month, and the Caltec is leased at a rate of $34,000 per month. On average, each machine is operated 25 eight-hour days per month. Labor and all other costs are fixed.
A. Does company usage reflect an optimal mix of testing equipment?
B. At a price of $5 per test should the company lease more machines?