PROBLEM B

Use the following to answer questions 29 - 30:

Ann is the president of the Paper Supply Company. She is thinking about updating the technology used to produce the paper goods her company sells. Sales have been increasing and are currently around 8,000 tons per year. She has identified the following potential options:

Alternative 1 - Use the current technology with annual fixed costs of $10,000 and variable costs of $10 per ton.

Alternative 2 - Update the current technology resulting in annual fixed costs of $24,000 and variable costs of $8 per ton.

Alternative 3 - Adopt the latest technology resulting in annual fixed costs of $44,000 and variable costs of $6 per ton.

29. The two relevant cross-over volumes (those volumes at which you would shift from one process to another).

	A.	5,000 & 10,000
	B.	5,000 & 7,000
	C.	7,000 & 10,000
	D.	7,500 & 10,000

30. Which alternative would you recommend, and why?

	A.	Alternative 1
	B.	Alternative 2
	C.	Alternative 3
	D.	Any of the above