A Company Is Investigating Two Automated Approaches for Its Production

question 45

Essay

A company is investigating two automated approaches for its production process. It has collected the following cost information about each:
$$\begin{array} { c c c } \text { Alternative } & \text { Fixed Cost } &\text { Variable Cost }\\ \mathrm { CNC } & \$ 80,000 & \$ 2.75 \\ \text { FMS } & \$ 190,000 & \$ 1.25 \\\end{array}$$
a. At what point of production will the firm be indifferent to which process it wants?
b. Which process is more economical for an annual production volume of 50,000 units?
c. Which process is more economical for an annual production volume of 100,000 units?

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Definitions:

Adoptive Parents

Individuals who become parents through the legal process of adopting a child.

Mesoderm

The central layer of the embryo from which the bones and muscles develop.

Embryo

An early stage of development in multicellular organisms, in humans, it refers to the period from implantation until about the eighth week of pregnancy.

Umbilical Cord

A tube that connects the fetus to the placenta.