A company is investigating two automated approaches for its production process. It has collected the following cost information about each:
$\begin{array}{|l|c|c|}
\hline \text { Alternative } & \text { Fixed Cost } & \text { Variable Cost } \
\hline \text { CNC } & \$ 80,000 & \$ 2.75 \
\hline \text { FMS } & \$ 190,000 & \$ 1.25 \
\hline
\end{array}$
-If the forecast annual production volume is 50,000 units, which technology alternative should the company choose?
A) CNC
B) FMS

Question

A company is investigating two automated approaches for its production process. It has collected the following cost information about each:
 $\begin{array}{|l|c|c|}
\hline \text { Alternative } & \text { Fixed Cost } & \text { Variable Cost } \
\hline \text { CNC } & \$ 80,000 & \$ 2.75 \
\hline \text { FMS } & \$ 190,000 & \$ 1.25 \
\hline
\end{array}$
-If the forecast annual production volume is 50,000 units, which technology alternative should the company choose?
A) CNC
B) FMS

Quizplus · Accepted Answer

The total cost for CNC is $80,000 + ($2.75 * 50,000) = $217,500. The total cost for FMS is $190,000 + ($1.25 * 50,000) = $252,500. CNC has a lower total cost at 50,000 units.

A Company Is Investigating Two Automated Approaches for Its Production