A Pen manufacturing company, SmartPens Ltd, has designed a new technol

Question 1：
Company A - 0.56/Unit
Company B - 0.61/Unit

For company A: Each unit costs 0.5+0.02=0.52
Its defective rate is 7.5%.
Order size does not change ultimate unit price, so just think of 100 pens.
(100 * 0.52)/92.5=0.562...

For company B whose defective rate is 2%.
(0.60*100)/98 = 0.612...

Question 2：My answer is (B) 10 months.
The expected sale is around 10K units for the first month, increasing by 10K units every month.
Company A has a maximum monthly spare capacity for production of 50K pens.
Company B has a maximum monthly spare capacity for production of 100K pens.

At first, I thought the answer is 15 because both companies can be tapped. There is no answer choice of 15.
So, SmartPens can only pick one company. Company B it is.

Question 3: My answer is (C). This one is a bit tricky as we have very limited information about the scenario.
(A) How higher than initially estimated? If just 1% higher, there should be be the cause of alarm. If 100% higher, maybe. I eliminate (A) for the lack of clarity.
(B) Very attractive as it would reduce lost sales by 7k. But my reading is that the company is more concerned with higher investment for an untested tech: "The company fears that such a high upfront investment for an untested technology could be a big risk and may get rejected by the board." So the accelerated ramp-up time, while definitely a positive, may not be the game-changer.
(C) If the demand is more assured, the company's investment is well-justified. Even if they outsource to either company A or B, they still have to produce pens in-house after 10 months at most.
(D) How much more? Not a big deal if it is just 0.01 cent more per pen. Plus, this is new tech (with patent protection I assume). How can A quote the same produce for another company? Besides, an alternative option can be company B, not necessarily own factory.
(E) Can be easily eliminated as it helps justify outsourcing options.

Competition mode is off now

OAs are:

Question #1

Company A: 0.56/Unit
Company B: 0.61/Unit

Question #2

B

Question #3

C

Could you please explain your answer for question #2? This part of the question, "The expected sale is around 10K units for the first month, increasing by 10K units every month." made me think that in Month 1 we'd sell 10K units, Month 2 - 20K, Month 3 - 30K, Month 4 - 40K etc. I'm not understanding how to relate Company B's capacity to this question.

Can you explain question 2 a bit further?

Now I think about it further: Company B should be smart enough to manufacture at maximum capacity from the first month. This will generate excessive supply for months later (beyond month 10) when the market demand is higher than maximum capacity.

If this strategy is adopted, company B can supply enough pens for as long as 19 months.

Evidently I got it wrong. Let's wait for the OA.

Your understanding is correct: First month 10k; Second month 20k, Month 10-100k.
Company B (or A) must manufacture enough pens to satisfy the ever-higher market.

We cannot assume the above highlighted on our own, we have to keep ourselves within the boundaries of the question data. Thinking so will go outside of the scope. The answer given in the source is C and I assume this might be a typo as I am unable to find any logic that supports C.