Question
Columbus Corp. has two different ways of producing its product, one which is better at high volume and the other which is better at low
Columbus Corp. has two different ways of producing its product, one which is better at high volume and the other which is better at low volume. Method alpha is a fast but wasteful process which requires $8 of materials and 8 minutes of both labor and machinery per unit produced. Method alpha requires $109157 in fixed cost to set up. Method beta is a slow but efficient process which requires $12 of materials and 20 minutes of both labor and machinery per unit produced. Method beta is easier to setup, with only $79079 in fixed cost. There are additional fixed costs of $274333 incurred regardless of which method is selected. Columbus sells its products for $56 apiece. The company pays $29 per hour in wages and incurs maintenance and depreciation costs of $10 per hour of machine usage.
What is the break even volume at which methods alpha and beta are equally attractive? (whole number}
Which method is better at volumes above the break even point you calculated? Provide a brief intuitive explanation.
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