A Firm Is About to Undertake the Manufacture of a Product

question 100

Essay

A firm is about to undertake the manufacture of a product, and is weighing the process configuration options. There are two intermittent processes under consideration, 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 and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 and variable costs of $1 per unit.
a. At what output does the large intermittent process become cheaper than the small one?
b. At what output does the repetitive process become cheaper than the larger intermittent process?

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Definitions:

Cognitive Structures

Mental frameworks that help individuals organize and interpret information, fundamental to learning and understanding the world.

Beliefs and Feelings

Internal cognitive and emotional states that influence an individual's perceptions and actions.

Moral Development

Refers to the process by which individuals acquire the standards of morality and ethics, understanding the difference between right and wrong.

Lawrence Kohlberg

An American psychologist best known for his theory of stages of moral development.