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2. Arktec Manufacturing must choose between the following two capacity options: a. (*) What would the cost

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2. Arktec Manufacturing must choose between the following two capacity options:

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a. (*) What would the cost be for each option if the demand level is 25,000 units per year? If it is 75,000 units per year?

b. (**) In general, which option do you think would be better as volume levels increase? As they decrease?Why?

c. (*) What is the indifference point?

Transcribed Image Text:

FIXED COST (PER YEAR) VARIABLE COST (PER UNIT) Option 1 Option 2 $500,000 $2 per unit $100,000 $10 per unit

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