Question
ABC company are comparing 2 method of production plan. Method A requires $8 of materials and 11 minutes of both labor and machinery per unit
ABC company are comparing 2 method of production plan. Method A requires $8 of materials and 11 minutes of both labor and machinery per unit produced. Method A also requires $113363 in fixed cost to set up. Method B requires $11 of materials and 17 minutes of both labor and machinery per unit produced. Method B is easier to setup, with only $84819 in fixed cost. There are additional fixed costs of $262466 incurred regardless of which method is selected. Columbus sells its products for $52 apiece. The company pays $26 per hour in wages and incurs maintenance and depreciation costs of $13 per hour of machine usage.
What is the break even volume at which methods alpha and beta are equally attractive?
Which method is better at volumes above the break even point you calculated? Provide a brief intuitive explanation.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started