Question: Three production processes - A, B, and C - have the following cost structure: Process Fixed Cost per Year Variable Cost per Unit A $120,000

Three production processes - A, B, and C - have the following cost structure:

Process

Fixed Cost

per Year

Variable Cost

per Unit

A

$120,000

$3.00

B

90,000

4.00

C

80,000

4.50

a. What is the most economical process for a volume of 8,000 units?

b. How many units per year must be sold with each process to have annual profits of $50,000 if the selling price is $6.95 per unit?

c. What is the break-even volume for each process?

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