An operations manager is deciding on the level of automation for a new process.
The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts. The variable costs per unit for each level of automation are primarily labor related. Each unit can be sold for $80.
As in many cases, you have the default alternative of doing nothing ($0 fixed cost, $0 variable costs). Hint: Please consider the "Do Nothing" option as a viable option when making your decision. Alternative Fixed Costs Variable Costs per Unit A $100,000 $54 B $280,000 $38 C $560,000 $20
a. Calculate the break-even quantities for each alternative. If the projected demand is 3,200 units, what should you do?
b. For each alternative, at what specific volume range is it the most attractive? Please specify the volume ranges for each alternative, including the "Do Nothing" alternative.