Two different manufacturing processes are being considered formaking a new product. The first process is less capital-intensive,with fixed costs of only $46,400 per year and variable costs of$720 per unit. The second process has fixed costs of $400,100but has variable costs of only $210 per unit.a. What is the break-even quantity, beyond which the sec-ond process becomes more attractive than the first?b. If the expected annual sale for the product is 840 units,which process would you choose?
Two different manufacturing processes are being considered formaking a new product. The first process is less capital-intensive,with fixed costs of only $46,400 per year and variable costs of$720 per unit. The second process has fixed costs of $400,100but has variable costs of only $210 per unit.a. What is the break-even quantity, beyond which the sec-ond process becomes more attractive than the first?b. If the expected annual sale for the product is 840 units,which process would you choose?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Two different manufacturing processes are being considered for
making a new product. The first process is less capital-intensive,
with fixed costs of only $46,400 per year and variable costs of
$720 per unit. The second process has fixed costs of $400,100
but has variable costs of only $210 per unit.
a. What is the break-even quantity, beyond which the sec-
ond process becomes more attractive than the first?
b. If the expected annual sale for the product is 840 units,
which process would you choose?
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