Two different manufacturing processes are being considered for making a new product. The first process is less capital-intensive, with fixed costs of only $48,800 per year an variable costs of $730 per unit. The second process has fixed costs of $407,000 but variable costs of only $195 per unit. a. What is the break-even quantity, beyond which the second process becomes more attractive than the first? The volume at which the second process becomes more attractive is units. (Enter your response rounded to the nearest whole number.) b. If the expected annual sales for the product is 820 units, which process would you choose? O A. Since the production volume at which the second manufacturing process becomes more attractive is lower than the expected annual sales for the product, you should choose the second manufacturing process. O B. Since the production volume at which the second manufacturing process becomes more attractive is higher than the expected annual sales for the product, you should choose the second manufacturing process. O C. Since the production volume at which the second manufacturing process becomes more attractive is lower than the expected annual sales for the product, you should choose the first manufacturing process. O D. Since the production volume at which the second manufacturing process becomes more attractive is higher than the expected annual sales for the product, you should choose the first manufacturing process.
Two different manufacturing processes are being considered for making a new product. The first process is less capital-intensive, with fixed costs of only $48,800 per year an variable costs of $730 per unit. The second process has fixed costs of $407,000 but variable costs of only $195 per unit. a. What is the break-even quantity, beyond which the second process becomes more attractive than the first? The volume at which the second process becomes more attractive is units. (Enter your response rounded to the nearest whole number.) b. If the expected annual sales for the product is 820 units, which process would you choose? O A. Since the production volume at which the second manufacturing process becomes more attractive is lower than the expected annual sales for the product, you should choose the second manufacturing process. O B. Since the production volume at which the second manufacturing process becomes more attractive is higher than the expected annual sales for the product, you should choose the second manufacturing process. O C. Since the production volume at which the second manufacturing process becomes more attractive is lower than the expected annual sales for the product, you should choose the first manufacturing process. O D. Since the production volume at which the second manufacturing process becomes more attractive is higher than the expected annual sales for the product, you should choose the first manufacturing process.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Two different manufacturing processes are being considered for making a new product. The first process is less capital-intensive, with fixed costs of only $48,800 per year and
variable costs of $730 per unit. The second process has fixed costs of $407,000 but variable costs of only $195 per unit.
a. What is the break-even quantity, beyond which the second process becomes more attractive than the first?
The volume at which the second process becomes more attractive is units. (Enter your response rounded to the nearest whole number.)
b. If the expected annual sales for the product is 820 units, which process would you choose?
O A. Since the production volume at which the second manufacturing process becomes more attractive is lower than the expected annual sales for the product, you should
choose the second manufacturing process.
O B. Since the production volume at which the second manufacturing process becomes more attractive is higher than the expected annual sales for the product, you
should choose the second manufacturing process.
O C. Since the production volume at which the second manufacturing process becomes more attractive is lower than the expected annual sales for the product, you should
choose the first manufacturing process.
O D. Since the production volume at which the second manufacturing process becomes more attractive is higher than the expected annual sales for the product, you
should choose the first manufacturing process.
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