Question: Two different manufacturing processes are being considered for making a new product. The first process is less capital intensive, with fixed costs of only $50,000

Two different manufacturing processes are being considered for making a new product. The first process is less capital intensive, with fixed costs of only $50,000 per year and variable costs of $700 per unit. The second process has fixed costs of $400,000 but has variable costs of only $200 per unit.

What is the break-even quantity beyond which the second process becomes more attractive than the first?

If the expected annual sales for the product is 800 units, which process would you choose?

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