A firm plans to begin production of a new small appliance. The manager must deci

Question

A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor at $9 each or to produce them in-house. Either of two processes could be used for in-house production; Process A would have an annual fixed cost of $160,000 and a variable cost of $8 per unit, and Process B would have an annual fixed cost of $205,000 and a variable cost of $7 per unit. Determine the range of annual volume for which each of the alternatives would be best. (Round your first answer to the nearest whole number. Include the indifference value itself in this answer. Enter your last answer as a whole number).

A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor at $9 each or to produce them in-house. Either of two processes could be used for in-house production; Process A would have an annual fixed cost of $160,000 and a variable cost of $8 per unit, and Process B would have an annual fixed cost of $205,000 and a variable cost of $7 per unit. Determine the range of annual volume for which each of the alternatives would be best. (Round your first answer to the nearest whole number. Include the indifference value itself in this answer. Enter your last answer as a whole number).

Explanation / Answer

here for the process A the fixed cost is $160,000 and the variable cost is $8 per unit

for the process B the fixed cost of $205,000 and a variable cost of $7 per unit

so as to find an volume range for which both the process is beneficial a graph can be drawn and the intersection pont can be identifed

the intersection point of the processess A and B ranges from 20833.33. hence the annual volume is 208.33

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.