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A firm is about to undertake the manufacture of a product, and it is weighing the process configuration options. There are two intermittent processes under
A firm is about to undertake the manufacture of a product, and it is weighing the process configuration options. There are two intermittent processes under consideration, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month and variable costs of $10 per unit. The larger intermittent process has fixed costs of $12,000 per month and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 per month and variable costs of $1 per unit. I - At what output does the repetitive process become cheaper than the larger intermittent process? The letter associated with the correct answer is A) 1,125 units B) 5,222 units C) 24,000 units D) 38,000 units E) None of the above II - At what output does the large intermittent process become cheaper than the small one? The letter associated with the correct answer is A) 1,125 units B) 5,222 units C) 24,000 units D) 38,000 units E) None of the above III - Which process offers the lowest cost to produce 20,000 units? The letter associated with the correct answer is A) The smaller intermittent process B) The larger intermittent process C) The repetitive focus process D) The smaller intermittent or the repetitive focus process, either one E) None of the above IV - The firm forecast to sell 20,000 units of the product at $4 per unit. What is the maximum possible profit? The letter associated with the correct answer is A) $28,000 B) $44,000 C) $68,000 D) $70,000 E) None of the above
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