Two different manufacturing processes are being considered for making a new product. The first process is less capital-intensive, with fixed costs of only $50,000 per year and variable costs of $700 per unit. The second process has fixed costs of $400,000 but has variable costs of only $200 per unit.a. What is the break-even quantity beyond which the second process becomes more attractive than the first?b. If the expected annual sales for the product is 800 units, which process would you choose?
Two different manufacturing processes are being considered for making a new product. The first process is less capital-intensive, with fixed costs of only $50,000 per year and variable costs of $700 per unit. The second process has fixed costs of $400,000 but has variable costs of only $200 per unit.a. What is the break-even quantity beyond which the second process becomes more attractive than the first?b. If the expected annual sales for the product is 800 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
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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 $50,000 per year and variable costs of $700 per unit. The second process has fixed costs of $400,000 but has variable costs of only $200 per unit.
a. What is the break-even quantity beyond which the second process becomes more attractive than the first?
b. If the expected annual sales for the product is 800 units, which process would you choose?
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