A Product Is Currently Made in a Process-Focused Shop, Where

question 85

Essay

A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable cost is $40 per unit. The firm is considering a fundamental shift in process, to repetitive manufacture. The new process would have fixed costs of $120,000, and variable costs of $8. What is the crossover point for these processes (round to the nearest whole unit)? For what range of outputs is each process appropriate?

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Definitions:

Deming's Fourteen Principles

A set of guidelines for managers proposed by W. Edwards Deming to improve product quality, productivity, and competitive position.

Work Force

The collective group of individuals employed in a company or industry, contributing to its productivity through their efforts and skills.

Productivity

The efficiency with which inputs are converted into outputs, often measured in terms of the rate of output per unit of input.

Central Limit Theorem

A statistical principle that states the distribution of sample means approximates a normal distribution as the sample size becomes larger, regardless of the population's distribution.