1.

A.

Data Mass Intermittent Repetitive Continuous

Customization
Fixed cost $1.260.000 $1.000.000 $1.625.000 $1.960.000
Variable Cost 1 30 24 28 25
(Labor)
Variable cost 18 26 15 15
2(Material)
Variable cost 12 20 12 10
3(Energy)
Total Variable 60 70 55 50
cost

Volume Optional 24.000

Total cost :
Mass Customization : $1.260.000 + (30+18+12) (24.000) = $2.700.000
Intermittent : $1.000.000 + (24+26+20)(24.000) = $2.680.000
Repetitive : $.1625.000 + (28+15+12) (24.000) = $2.945.000
Continuous : $1.960.000 + (25+15+10)(24.000) = $3.160.000
Based on project annual demand, the maximize annual profit from producing the maxistand is
to use the Intermittent process.
B. The value of annual profit using this method is $200.000
The value of annual profit = Annual demand * Price – maximixe annual profit
= 24.000 units *$120/per unit – $2.680.000
= $200.000
2.
a. a. Let the cross over point be “x” units. At the point of crossover the total costs for the
high speed shredder and the clunker will be the same.
Total cost for high speed shredder:
= fixed costs+total variable costs
= 85,000+1.25x
Total cost for clunker:
= fixed costs+total variable costs
= 44.000+1.75x
Now at the point of indifference both the costs are same.
So, 85,000+1.25x = 44.000+1.75x
or, 0.50x = 41,000
or x= 82,000 units
b. If monthly sales = 60,000 bags then
total revenue = 60,000x2.50 = $150,000
Total costs = 85,000+ (1.25x60,000) = 160,000
Profit revenue - costs = 150,000 - 160,000 = -10,000
Thus there will be a loss of $10.000
c. Revenue = 150,000 Total costs = 44,000+(1.75x60,000) = 149,000
Profit = revenue - costs = 150,000 - 149,000 = $1,000