Question: Metal Casting Products ( MCP ) plans to replace its existing metal casting facility with a new one. MCP is considering two possible capacities for

Metal Casting Products (MCP) plans to replace its existing metal casting facility with a new one. MCP is considering two possible capacities for the new facility: 300,000 or
450,000 units per year. The 300,000 unit plant would have an annual fixed cost of Rs.
5000,000 and a per unit production cost of Rs.45; the 450,000 unit plant would have an annual fixed cost of Rs.7000,000 and a per unit cost of Rs.38. Suppose MCP projects its sales to be 180,000 units next year and it expects them to grow by 6-8% each year for the 10 years. Which capacity option would you
recommend and why?

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