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 100,000 units, which technology alternative should the company choose?
A) FMS
B) CNC

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 100,000 units, which technology alternative should the company choose?
A) FMS
B) CNC

Quizplus · Accepted Answer

The total cost for each alternative at 100,000 units is calculated as follows: CNC: $80,000 + (100,000 * $2.75) = $355,000. FMS: $190,000 + (100,000 * $1.25) = $315,000. FMS has a lower total cost at the given production volume, making it the better choice.

A Company Is Investigating Two Automated Approaches for Its Production