Problem -
Metters 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 Fixed Cost of Pant & Equip.
|
Variable Costs (per unit) ($)
|
|
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
|
Metters Cabinets projects an annual demand of 24,000 units for the Maxistand. The Maxistand will sell for $120 per unit.
a) Which process type will maximize the annual profit from producing the Maxistand?
b) What is the value of this annual profit?