Question

A manager is trying to determine which of three production processes to implement to produce a component for a new product line. Process A would entail a variable cost of $17 per unit and an annual fixed cost of $150,000. Process B would entail a variable cost of $11 per unit and an annual fixed cost of $250,000. Process C would entail a variable cost of $20 per unit and an annual fixed cost of $180,000.

Develop three separate models in your spreadsheet to calculate Total cost for each process. The models must be flexible and able to calculate Total cost for any Quantity produced.

Create a Cost-Volume graph that shows total cost lines for all three options. (Volume should range from 0 to 30,000)

Write an interpretation of your graph

Answer 1

a) The spreadsheet model of figuring absolute expense is following:

b) Cost-Volume chart is following:

c) The diagram demonstrates the volume go in which one of the procedures is the most temperate.

Add up to cost bend of Process An is at the base for volume extend from 0 to 16667 (which is the hybrid point among An and B). Along these lines, process An is the most temperate for volume extend from 0 to 16,667

On the off chance that the volume is more noteworthy than 16667, process B is the most temperate.