Two processes are put in place for production. Neither will be removed. Process (R) is designed to
Question:
Two processes are put in place for production. Neither will be removed. Process \(R\) is designed to produce 10,000 units per year and has a fixed cost of \(\$ 90,000\) per year. Process \(T\) has the same design capacity and has a fixed cost of \(\$ 80,000\) per year. Process \(\mathrm{R}\) produces the initial 4,000 units at a variable cost of \(\$ 8\) per unit and the next 6,000 units at a variable cost of \(\$ 17\) per unit. Process T produces the first 5,000 units at a variable cost of \(\$ 9\) each and produces the next 5,000 at \(\$ 5\) each. Assume that the fixed costs are incurred even if no production is assigned to the process.
a. What should be the loads assigned to Processes \(\mathrm{R}\) and \(\mathrm{T}\) if demand for the product is 5,500 units?
b. What is the total cost and average cost per unit for Part a?
c. What should be the loads assigned to Processes \(\mathrm{R}\) and \(\mathrm{T}\) if demand for the product is 9,500 units?
d. What is the total cost and average cost per unit for Part c?
Step by Step Answer:
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt