Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Crestline Manufacturing must decide whether to invest in process option X or option Y. Process X includes automated assembly equipment and requires three employees. On the other hand, process Y includes semi-automated assembly equipment and requires six employees. Process X incurs a fixed cost of $900,000 and a variable cost of $25 per unit. Machine Y incurs a fixed cost of $600,000 and a variable cost of $30 per unit. Solve the following and show all the steps:
- a) What is the break-even quantity between these two processes? Provide a rough plot of your analysis and show the break-even point on the plot.
- b) If predicted demand for next year is 80,000 panel folds, which process option do you recommend? How much cost does the recommended process save?
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