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BE ICE #3 (with ans)

# BE ICE #3 (with ans) - the first process(√ the second...

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NAME ___________________________________________ SECTION: _____________ RELATIONSHIP: PROCESS COSTS & PRODUCT VOLUMES Two manufacturing processes are being considered for making a new product. The first process is less capital intensive, with fixed costs of \$50,000 per year and variable costs of \$700 per unit. The second process has fixed costs of \$400,000 annually, with variable costs of \$200 per unit. a. What is the break even quantity for the two processes? [700 units / year] b. If lowest overall costs per year is your overall objective, for what range of annual production quantities should you select: the first process? ________________________ [0 – 700 units / year] the second process? _______________________ [700+ units / year] c. If annual sales are expected to be 600 units, which process should be selected?
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Unformatted text preview: ____ the first process (√) ____ the second process Operations and Engineering have found a way to reduce the cost of the second process, such that the fixed costs for this process decrease from \$400,000 to \$300,000 annually. All other costs remain the same (1 st process fixed = \$50,000 / year, 1 st process variable = \$700 / unit, 2 nd process variable = \$200 / unit). d. What is the new break even quantity between the two processes? [500 units / year] e. Does this change the process selection for the new sales volume of 600 units / year? ____ [yes] If so, which process should be selected? ____ the first process [0 – 500] ____ the second process [500+] (√)...
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