Question

Another manager wants to evaluate an internal process that would be used to produce the new product. The fixed and variable costs and capacities for each process are listed below. Utilize this information to answer questions 3-4 Fixed Cost 140,000 200,000 90,000 Variable Cost/Unit 40 20 60 rocesS apa 5,000 7,000 2,000 3. What are the low-cost output ranges for each alternative given the cost info and capacity info above? (show ALL pertinent math and relevant ranges below (on both the 0- continuum and in table). (5 pts) Math Area rocesS nge Answer If demand was expected to range between 2,800 and 5,500 for the next 10 years, which process would you select? Explain in one sentence. (1 pt) Answer.

Answer 1

Below is the calculation of the cost for different units -

File Home Insert Page Layout Formulas D ata Review B6 Process 3 Fixed Cost140000 200000 90000 4 Variable Cost 40 5 No. of units Cost Cost 140040200020 90060 144000 202000 96000 160000 210000 120000 180000 220000 150000 200000 230000 180000 220000 240000 210000 240000 250000 240000 260000 260000 270000 280000 270000 300000 300000 280000 330000 320000 290000 360000 40000 300000 390000 360000 310000 420000 380000 320000 450000 400000 330000 480000 420000 340000 510000 Cost Lowest Cost Process 100 500 1000 13 3000 3500 16 4500 18 19 20 21 5500

Below is the range answer -

Range	Process	Reason
0-2000	R	Capacity for R is 2000 max
2000-3000	P
3000-infinite	Q

For the expected demand range 2800 to 5500 units, we should chose Process Q as from above it is clear that cost of Q is lowest as soon as demand crosses 3000.