Question

Process A has a fi xed cost of $12,000 per year and

a variable cost of $30 per unit. For process B,

5 units can be produced in 1 day at a cost of $125.

If the company’s MARR is 10% per year, the fi xed

cost of process B that will make the two alterna-

tives have the same annual cost at a production

rate of 1000 units per year is closest to:

(a) Less than $10,000

(b) $18,000

(c) $27,000

(d) Over $30,000

Answer 1

Process A fixed cost $12000 variable cost $30 peu unit 80, cost function you puocess A, if the unks produced is a C(x) = 12000 + 30x. Process B let fixed cost the foo and cost of producing. huuts = $125 Cost of lumit - $125 $25 80 cost funchon hell process B, if the units produced is x C(x) = f( + 25x

The fixed cost that will make two alteuncetue have same annual cost at a production cate of 1000 units per year att 800 C(X) = C(x)} 12,000 + 30s= f G + 25x. utting x=1000 unts (2000 + 30 (1000) = f C + 25(1000) 12000 + 30ood = fc + 25000

12000 + 30000-25000 = fo fc = 17,000 800 fixed cost of process B = $17000 that will Make two processes same. It is closest to $18,000 so, correct answer (6) $18000
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