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Creative Cabinets, inc., needs to choose a production method for its new office shelf, the Maxistand. To help accomplish this, the firm has gathered the following production cost data:
Process Type Annualized variable costs
fixed cost (per unit) ($)
Plant & Equip. Labor Material Energy
Mass
Customization $1,260,000 30 18 12
Intermittent $1,000,000 24 26 20
Repetitive $1,625,000 28 15 12
Continuous $1,960,000 25 15 10
Creative Cabinets projects an annual demand of 24,000 units for the Maxistand. The Maxistand will sell for $120 per unit.
1) Which process type will maximize the annual profit from producing the Maxistand?
2) What is the value of this annual profit?