A milling process is accomplished using either method X or Y. Method X has fixed costs of $10,000 per year with a variable cost of $50 per unit. Method Y is an automated process with a fixed cost of $5,000 per year and a variable cost of only $30 per unit. The number of units that must be produced each year in order for method Y to be favored is closest to: (choose one)
(a) Y will be favored for any level of production
(b) 125
(c) 375
(d) X will be favored for any level of production
Both the fixed cost and variable cost of Method X are higher than those of Y. Therefore,
X can never be favored.
Answer is (a) Y will be favored for any level of production
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