M4 Module – Discussion Topic: ProcessSelection
A manufacturer of parts has the following choices for producinga part: (i) Make the part using automated equipment (fixed cost =$150,000, variable cost per unit = $20), or (ii) Make the partusing low-tech equipment (fixed cost = $50,000, variable cost perunit = $60). Annual demand for the part is estimated to be in therange of 2,400-2600 units.
1) Can breakeven analysis can be used to assist in the processselection decision?
2) Discuss the effects of volume (demand) rangeon process selection using breakeven analysis.
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