Problem:
A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable cost is $50 per unit. The firm is considering a fundamental shift in process, to repetitive manufacture. The new process would have fixed costs of $90,000, and variable costs of $5.
Required:
Question 1) What is the crossover point for these processes?
Question 2) For what range of outputs is each process appropriate?
Solve the problem and show all work.