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(a). Metters Cabinets, Inc., needs to choose a production method for its new office shelf, the Maxistand. To help accomplish this, the firm has gathered
(a). Metters Cabinets, Inc., needs to choose a production method for its new office shelf, the Maxistand. To help accomplish this, the firm has gathered the following production cost data: [8 marks] Metters Cabinets projects an annual demand of 24,000 units for the Maxistand. The Maxistand will sell for $120 per unit. i) Which process type will maximize the annual profit from producing the Maxistand? ii) What is the value of this annual profit? (b) Stapleton Manufacturing intends to increase capacity through the addition of new equipment. Two vendors have presented proposals. The fixed cost for proposal A is $65,000 and for proposal B,$34,000. The variable cost for A is $10, and for B, $14. The revenue generated by each unit is $18. At an expected volume of 9,200 units, which alternative should be chosen? [2 marks]
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