A manufacturer of parts has the following choices for producing a part: (i) Make the part using automated equipment (fixed cost = $150,000, variable cost per unit = $20), or (ii) Make the part using low-tech equipment (fixed cost = $50,000, variable cost per unit = $60). Annual demand for the part is estimated to be in the range of 2,400-2600 units.
Can breakeven analysis can be used to assist in the process selection decision?
Discuss the effects of volume (demand) range on process selection using breakeven analysis.
What are limitations of using breakeven analysis?
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