Question

Selecting Production Process Three production processes-repetitive (R), batch manufacturing (B), and job shop (J)- have the following cost structure: Process Fixed Cost per year (FC) $110,000 Variable Cost per Unit (V) $2 $80,000 $75,000 a. What is the most economical process for a volume of 10,000 units per year? b. At what volume each of the processes be preferred?

Answer 1

Break-even analysis is a technique by which business identify the sales volume when the total cost and total revenue is equal. So, the company neither makes profit nor loss.

Break-even analysis is important for business because it help in drafting good business plan by determining cost structure and the volume required to cover the cost in order to make profit.

Tatal cast a Firerd cast ben unit ex yeasH volunre be c TCR =-110,000+ 2C, Teg 30,000 + _4ng TC 15000+5 110,000 + 20,000 130,000 Ta:一80,000 + (4 x 10,000 30,000 t 40,000. :120,000 TC 15000+(5 Xt0,000) :15000 + 50,000 25 $ 125,000 110,000 + 2n-..50,000-t 49c 4.-2Cニー110,000-80,000 2c 30,000 nc- 30000 -15000 unit 2.

Page 80,000 turn·ニ75000 + 5冘 ne-5000 units 島 R, İs-beherreak usher volunu Ls above 15000 units vollunu Ls betweun 5000-15000 unit