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Your company has two manufacturing sites that produce electronic components. One has a scrap rate of 12% of the 10,000 manufactured per year. The other plant has a scrap rate of 5% of the 7500 manufactured per year. A product quality audit reveals that the semiautomated pick-and-place machine (vs. the fully automated machine) is contributing to these scrap rate differentials. It costs $20 for each scrapped component. Ignoring depreciation and assuming that the machine has a life of 5 years, what is the maximum amount you should invest in an upgrade to the semiautomatic machine? Assume production levels will remain constant.
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