Question: Two manufacturing processes are being considered for making a new product. Process A is less capital intensive, with fixed costs of $60,000 per year and

Two manufacturing processes are being considered for making a new product. Process A is less capital intensive, with fixed costs of $60,000 per year and variable costs of $700 per unit. Process B has fixed costs of $400,000 annually, with variable costs of $300 per unit.

a. What is the break-even quantity for the two processes? If annual sales are expected to be 700 units, which process should be selected?

b. Operations and Engineering have found a way to reduce the cost of Process B, such that the fixed costs for this process decrease from $400,000 to $300,000 annually. All other costs remain the same. Does this change the process selection for the annual sales volume of 700 units?

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