A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable costs are $50 per unit. The firm is considering a fundamental shift in process, to repetitive manufacturing
The new process would have fixed costs of $90,000, and variable costs of $5. What is the crossover point for these processes? For what range of outputs is each process appropriate?
The crossover is at 1800 units annually. For volumes under 1800, the process focus is cheaper; for volumes over 1800 units, the repetitive focus is cheaper.
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