Question: This process has only two tasks. Units are inspected after each task and scrapped if defective. Table 2 below shows the variable cost at each
This process has only two tasks. Units are inspected after each task and scrapped if defective. Table 2 below shows the variable cost at each task and each task's current yield, as well as how much the yield could be improved to and at what cost.
The product is sold for $100. If you start out with enough labor and material at Task 1 to produce 1000 units if the yield is 100%, how much would the contribution be after investing in the improvement, for each option? Assume you will invest in the improvement, then produce this product at 1000 units per year for two years.
| Task | Variable Cost added at this task | Current Yield | Yield if improved | Cost to improve |
| 1 | $30 | 93% | 97% | $2,000 |
| 2 | $20 | 91% | 96% | $4,000 |
What is the variable cost at the end of Task 2?
What is the process yield if you improve Task 1?
What is the variable cost if you improve Task 1?
What is the process yield if you improve Task 2?
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