Answered: What is the break-even quantity beyond…

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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Spartan Castings must implement a manufacturing process that reduces the amount of particulates emitted into the atmosphere. Two processes have been identified that provide the same level of particulate reduction. The first process is expected to incur $340,000 of fixed cost and add

$40 of variable cost to each casting Spartan produces. The second process has fixed costs of $100,000 and adds $70 of variable cost per casting.

a. What is the break-even quantity beyond which the first process is more attractive?

The break-even quantity is 8000 castings.

b. What is the difference in total cost if the quantity produced is

5,000?

The total cost of process 1 is greater. Find the difference in total cost?

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