Question
A new firm has to decide between choosing a batch and line production. The equipment cost to setting up a line production is $1000, the
A new firm has to decide between choosing a batch and line production. The equipment cost to setting up a line production is $1000, the labor costs are $8 per unit produced and the raw material cost is $ 2 per unit produced. The batch production process has an equipment cost of $ 200, the labor costs are $ 40 per unit produced and the raw material cost is $ 10 per unit produced. What is the breakeven quantity i.e. the quantity at which you are indifferent between a batch and line production? (Show Your calculations; a. Q = (Fixed Cost1 - Fixed Cost2)/ (Variable Cost2-Variable Cost1))
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