An Organization Is Considering Three Process Configuration Options

question 91

Essay

An organization is considering three process configuration options. There are two different intermittent processes, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month and variable costs of $10 per unit. The larger intermittent process has fixed costs of $12,000 per month and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 per month and variable costs of $1 per unit.
(a) If the company produced 20,000 units, what would be its cost under each of the three choices?
(b) Which process offers the lowest cost to produce 40,000 units? What is that cost?