For a company producing 10 pieces per day:

Question

Process I requires 20 units of fixed cost and 3 units of variable costs per piece, while process II required 50 units of fixed costs and 1 unit of variable cost per piece. For a company producing 10 pieces per day:

(a) Process I should be chosen

(b) Process II should be chosen

(c) Either of the two processes should be chosen

(d) A combination of the process I and process II should be chosen

Answer 1

PROCESS 1 SHOULD BE CHOOSEN BECAUSE TOTAL COST FOR PROCESS 1 IS LESS COMPARED TO PROCESS II