Two separate processes are being considered for manufacturing a product. Process A has fixed costs of $12,000 and variable costs of $6 per unit. Process B has fixed costs of $16,000 and variable costs of $4 per unit. a. What is the break-even quantity for the two processes (Show your work)? b. Which process would be more cost-effective for producing 1,000 units? c. Which process would be more cost-effective for producing 3,000 units?

Two separate processes are being considered for manufacturing a product. Process A has fixed costs of $12,000 and variable costs of $6 per unit. Process B has fixed costs of $16,000 and variable costs of $4 per unit. a. What is the break-even quantity for the two processes (Show your work)? b. Which process would be more cost-effective for producing 1,000 units? c. Which process would be more cost-effective for producing 3,000 units?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 7CE

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Question

Two separate processes are being considered for manufacturing a product. Process A has fixed costs of $12,000 and variable
costs of $6 per unit. Process B has fixed costs of $16,000 and variable costs of $4 per unit.
a. What is the break-even quantity for the two processes (Show your work)?
b. Which process would be more cost-effective for producing 1,000 units?
c. Which process would be more cost-effective for producing 3,000 units?

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