Mikey W. Smitty is confident that demand for his “WesternRap” CD will substantially exceed the break-even point computed in Problem 6-3. So, Mikey is contemplating hav-ing his CD cut at a classier (and pricier) studio. The cost to record the CD would rise to $9000. However, since thisnew studio works with very high volume, production costswould fall to $2 per CD.a. What is the breakeven point for this new process?b. Compare this process to the process proposed in theprevious problem. For what volume of demand shouldMikey choose the classier studio?

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Aggregate Planning Strategies

On the basis of the demand forecast, an organization can complete its business plans. When the business plans are complete, an organization can work backward from the completed total sales to the raw materials needed. Thus, annual and quarterly plans are divided into labor, raw material, working capital, and other demands for a medium-term period (6 months to 18 months). This process of evaluating moderate production requirements is known as aggregate planning.