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A parts manufacturer plans to replace its existing facility. Management is considering two options: 200,000 or 250,000 units per year.8 The 200,000 unit plant has a fixed cost of $4.0 million and a per unit cost of $20. The 250,000 unit plant has a fixed cost of $6.0 million and a per unit cost of $15. The parts will be sold for an average price of $60 per unit.

A) Calculate the break-even point for each capacity alternative.

B) Suppose the company projects its sales to be 220,000 units per year. What alternative would you recommend? - Hint: Calculate the annual profit in each case.

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91763726

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