QUESTION $18$

PROBLEM B:

Use the following to answer questions $18-19$:

Ann is the president of the Paper Supply Company. She is thinking about using different technology to produce the paper goods her company sells. Sales have been

increasing and are currently around $4,000$ tons per year. She has identified the following potential options:

Alternative $1-$ Use the current technology with annual fixed costs of $$15,000$ and variable costs of $$11$ per ton.

Alternative $2-$ Adopt the latest technology resulting in annual fixed costs of $$45,000$ and variable costs of $$7$ per ton.

Alternative $3-$ Update the current technology resulting in annual fixed costs of $$25,000$ and variable costs of $$9$ per ton.

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

a$.7,500$&$10,000$

b$.5,000$&$7,500$

c$.5,000$&$10,000$

d$.8,500$&$10,000$

QUESTION $19$

Which alternative would you recommend?

a$.$ Alternative $1$

b$.$ Alternative $2$

c$.$ Alternative $3$

d$.$ Any of the above