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Garai 1) Two production processes A, B have the following cost structure as shown in the diagram below: (15 min) List of formulas: Profit= Revenue
Garai 1) Two production processes "A, B" have the following cost structure as shown in the diagram below: (15 min) List of formulas: Profit= Revenue - Total cost Revenue = Selling price* volume Total cost = Fixed cost - cost per item volume Variable Cost Fored Cost Proess per Year per Unit A $100,000 $3.00 80,000 5.00 Break even volume = (Fixed cost)/(Unit contribution margin) DO a. What is the most economical process for a volume of 5,000 units? (8 marks) b. How many units per year must be sold with each process to have annual profits of $50,000 if the selling price is $9 per unit? (4 marks) c. Calculate the break-even volume for process B assuming $9 selling price. (4 marks )
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