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Question - A toy company runs three manufacturing processes (P1, P2, and P3) under the following production cost structure:
Process
Fixed Cost per Year
Variable Cost per Unit
P1
$120,000
$3.00
P2
90,000
4.00
P3
80,000
4.50
Required -
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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