What is the break-even point for the manual process

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A distributor of prewashed shredded lettuce is opening a new plant and considering whether to use a mechanized process or a manual process to prepare the product. The manual process will have a fixed cost of $41,400 per month and a variable cost of $1.75 per bag. The mechanized process would have a fixed cost of $97,850 per month and a variable cost of $1.25 per bag. The company expects to sell each bag of shredded lettuce for $2.20.

a) What is the break-even point for the manual process (in units)?

b) What is the break-even point for the mechanized process (in units)?

c) A point of indifference for two processes is quantity at which each process generates the same amount of profit (review video). What is the point of indifference for the two processes? (Hint: If you have a break-even for each process – add another cell the calculates the difference for the profits between the two processes and have only one cell that represents quantity that be used to calculates costs/revenues for each process)

d) Which process would you select if the quantity that is sold is greater than the quantity calculated as the point of indifference?

e) Which process would you select in the quantity sold is less than the quantity calculated as the point of indifference?

Reference no: EM132204816

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