ABC Ltd. has an order for 500000 parts. These parts can be manufactured either by machining process or by forging process. The costs involved in two methods of manufacturing are as follows:
|
Process ®
Costs ¯
|
Machining
|
Forging
|
|
Fixed costs (Rs)
Variable costs per part (Rs)
|
15,000
6
|
95,000
5
|
- Which of the two methods will be more profit-making for ABC Ltd.?
- Find the minimum order quantity for the forging process to be economical. 20