Problem:

A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable cost is $50 per unit. The firm is considering a fundamental shift in process, to repetitive manufacture. The new process would have fixed costs of $90,000, and variable costs of $5.

Required:

Question 1) What is the crossover point for these processes?

Question 2) For what range of outputs is each process appropriate?

Solve the problem and show all work.