Reference no: EM132237814

Zan Azlett and Angela Zesiger have joined forces to start A&Z Lettuce Products, a processor of packaged shredded lettuce for institutional use. Zan has years of food processing experience, and Angela has extensive commercial food preparation experience. The process will consist of opening crates of lettuce and then sorting, washing, slicing, preserving, and finally packaging the prepared lettuce. Together, with help from vendors, they think they can adequately estimate demand, fixed costs, revenues, and variable cost per 5-pound bag of lettuce. They think a largely manual process will have monthly fixed costs of $37,500 and variable costs of $1.75 per bag. A more mechanized process will have fixed costs of $75,000 per month with variable costs of $1.25 per 5-pound bag. They expect to sell the shredded lettuce for $2.50 per 5-pound bag.

1. At what quantity would Zan and Angela be indifferent to the process selected?

2. Over what range of demand would the manual process be preferred over the mechanized process? Over what range of demand would the mechanized process be preferred over the manual process?