The process used by the Gourmet Food Company (Process 1) to produce dressings has annual fixed costs of $120,000 and variable costs of $0.97 per bottle. The company just entered into an agreement with a major national grocery store chain to sell its dressings. Sales volumes are expected to increase. Two new processes are being explored. Process 2 has a fixed cost of $243.000 per year and variable costs of $0.41per bottle. Process 3 has fixed costs of $419,200 per year and variable costs of $0.31 per bottle.
What are the indifference points between the processes?
-process 1 &2__________bottles
-process 2 & 3__________botlles
If sales are expected to be 1,160,000 bottles, which process should be used?
process 1? -
process 2? -
process 3?