3. A soft drink maker wants to expand into a neighboring country. They want the product bottled in that country to avoid political issues and to enhance the local image of the product. They have identified two options for the expansion. The first is to build a highly automated plant. The economies of scale would allow them to produce a can of soda for $0.04 and the distribution costs would be $0.02 per can. This facility would cost $1 million per year in fixed costs. The second option would be to build a semi-automated plant that would cost $650,000 per year in fixed costs. However, the cost to produce a can would be $0.07 and the distribution cost would be $0.04 per can.

c) Now suppose each alternative has a different capacity. The total estimated demand for the year is 6,000,000 if the company sells each can for $0.32. However, only the highly automated process can produce and distribute this amount. If the semi-automated process is used, the company would only be able to produce and distribute 4,700,000 cans annually. To offset the lower volume, the company will raise the price of each can to $0.35. It will be able to sell all it produces at this price. Using all of the information presented the problem with the additional information provided in this part of the problem, which process should it use? Why?