Chapter 1: Break-Even Point Quiz
This problem is a bit more complicated than the suggested problem and in-class
problem on this topic. (Hint: Remember I said in class that there were two ways
to solve this type of problem. Not in this case.)
Here is the situation… A part can be manufactured two ways. Method #1 requires
a setup cost of $10,000, and the parts can be manufactured for $100 each.
Method #2 requires a $3,000 setup cost, and the parts can be manufactured for
$200 each. However, Method #2 requires a $3,000 cost of down-time and
recalibration of the machining equipment after every 40 units produced.
Question: How many units can be produced using Method #2 before its cost per
unit exceeds that of Method #1?
Although this is an individual quiz, I suggest some initial group work to figure it
out. Your final work must be your own. In this case, neatness counts. Upload your
hand work in Word, PDF, or JPG format, please.