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A small manufacturing company that produces handmade products is working 6 days per week 24 hours a day (three shifts per day) at a capacity
A small manufacturing company that produces handmade products is working 6 days per week 24 hours a day (three shifts per day) at a capacity is 9000 units per week. The fixed cost with the current setup is SR 100 000 per week and the cost of raw material is SR 150 per unit, other operating costs is estimated to be SR 50 per unit. The company received an order to produce an extra of 1500 units. The options that the company have to fulfill the order are: OPTION 1: Increase the number of operators per shift, the operating cost will be SR 125 per unit and the fixed cost will be the same. OPTION 2: Work on Friday (full day) the fixed cost will be SR 120 000 per week and the operating cost will increase to be SR 100 per unit. Calculate the breakeven volume for these options. Which option is more economical to fulfill the order
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