Question

need help with answer please !!

Metters Cabinets, Inc, needs to choose a production method for its new office shelf, the Maxistand. To help accomplish this the firm has gathered the following production cost data: Variable Costs (per unit) ($) Labor Annualized Fixed Cost of Plant & Equipment $1,200,000 Material Process Type Energy Mass Customization Intermittent Repetitive Continuous 30 18 12 $1,000,000 24 26 20 $1,625,000 28 15 12 $2,100,000 15 25 10 Metters Cabinets projects an annual demand of 24,000 units for the Maxistand. The selling price for the Maxistand is $120 per unit a) Based on the projected annual demand, the best alternative available is to use the process

Answer 1

Here, the best alternative will include lowest cost value,

Annual demand = 24000 Units

Associated Total Cost with Mass customization = Fixed cost + Total Variable cost = 1200000+(30*24000)+(18*24000)+(12*24000)= 2640000

Associated total cost with Intermittent = Fixed cost + Total Variable cost = 1000000+(24*24000)+(26*24000)+(20*24000)= 2680000

Associated total cost with Repetitive = Fixed cost + Total Variable cost = 1625000+(28*24000)+(15*24000)+(12*24000)=2945000

Associated total cost with continuous = Fixed cost + Total Variable cost =2100000+(25*24000)+(15*24000)+(10*24000)= 3300000

From above calculation Mass customization has lowest Input cost and hence, it can generate maximum profit, thus, Best alternative would be here, Mass Customization Process,