Three Production Processes - A,B,and C - Have the Following

question 61

Essay

Three production processes - A,B,and C - have the following cost structure: $$\begin{array} { c c c } \hline\hline\text { Process } & \begin{array} { c } \text { Fixed Cost } \\\text { per Year }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { per Unit }\end{array} \\\hline \text { A } & \$ 120,000 & \$ 3.00 \\\text { B } & 90,000 & 4.00 \\\text { C } & 80,000 & 4.50 \\\hline \hline\end{array}$$
a. What is the most economical process for a volume of 8,000 units?
b. How many units per year must be sold with each process to have annual profits of $50,000 if the selling price is $6.95 per unit?
c. What is the break-even volume for each process?

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Definitions:

Procedural Flexibility

The ability to adapt the processes and rules of an organization or system to accommodate different situations or requirements.

Continuous Process Improvement

An ongoing effort to enhance products, services, or processes by making incremental improvements over time.

Corporate Culture

The shared values, beliefs, and practices that characterize an organization and influence its employees' behavior and attitudes.

Job Control Unionism

A labor movement strategy focusing on gaining control over work conditions, job distribution, and employment terms through collective bargaining.