Two manufacturing processes are being considered for making a new product. Process #1 is less capital intensive, with fixed costs of $200,000 per year and variable costs of $500 per unit. Process #2 has fixed costs of $600,000 annually, with variable costs of $100 per unit.
a. What is the break-even quantity between the two processes?
b. If annual sales are expected to be 900 units, which process should be selected?