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

question 49

Essay

A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable costs = $10 per unit. If a price of $80 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain.

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Definitions:

Measured Variable

A specific quantity or condition that is monitored and measured in a process, such as temperature, pressure, or flow rate.

Set Point

The desired or target value for a controlled variable in a control system, against which actual values are compared to determine the need for corrective action.

Proportioning Action

A control method where the output is adjusted in proportion to the difference between the actual value and a setpoint.

Proportional Band

A control parameter in PID controllers that determines the range of proportional action surrounding a setpoint for maintaining system stability.