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Having been in a good business for years, a bakery shop is now considering an upgrade. Currently, the shop mainly operates manual processes with only $1,500 fixed cost a year and $40 for each cake it produces. Hilda, the owner is reviewing two alternatives: semi-automatic and full-automatic equipment. Semi-automatic equipment can lower down the cost to only $25 a cake at $6,000 fixed cost a year. Using full-automatic equipment can reduce the cost significantly to $12 a cake. However, the fixed cost will increase to $15,000 a year.
Which alternative should Hilda choose?
Draw the graph to illustrate this situation.
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