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- This topic has 7 replies, 3 voices, and was last updated 1 year ago by
John Moffat.
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- September 12, 2022 at 6:03 pm #666246
Can anyone help me with this question?
Lewis Co is considering automating its production line. If it chooses to do so, fixed costs will rise from $40,000 per year to $120.000 per year, while variable costs will fall from $22 per unit to $12 per unit.
What is the minimum annual production level at which automation would be worthwhile (to the nearest unit)?
September 13, 2022 at 7:00 am #666259He will have extra fixed costs of $80,000.
Each unit produced will save $8 in variable costs.
So how many units will he need to produce in order to save $80,000?
September 13, 2022 at 3:17 pm #66628410,000 units
September 13, 2022 at 3:33 pm #666292Correct!
September 13, 2022 at 11:20 pm #666315I think he will save 10$ per unit as it is 22-12, final answer would be 8,000 units.
September 14, 2022 at 8:59 am #666352Sorry – you are correct. I read the question too quickly 🙁
November 17, 2022 at 4:53 pm #671740Sir John would this not be solved theough high-low method
November 18, 2022 at 8:47 am #671785No, not really. It is just using basic knowledge and arithmetic 🙂
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