Question 5 5 pts A manufacturer is considering three production methods for a ne

Question

Question 5 5 pts A manufacturer is considering three production methods for a new product. Method 1 can make the product with a fixed cost of $300,000 and variable cost $300 per unit; Method 2 can make the product with a fixed cost of $600,000 and variable cost $150 per unit: Method 3 can make the product with a fixed cost of $900,000 and variable cost $100 per unit. With forecast sales of 3,600 units, the company thinks it can sell the product at price $375 per unit. What is the expected profit with the best production method? ?????-T Te 12pt ? Paragraph . 0 words

Explanation / Answer

The data can be represented as follows:

It is forecast that the sales will be of 3600 units and the sale price would be $375.

The expected profit in each case can be calculated as follows:

From the above we see that the expected profit is the highest when the production method 2 is used.

The expected profit when the production method 2 is $210000.

Method Method 1 Method 2 Method 3 Fixed Cost $300,000 $600,000 $900,000 Variable Cost per unit $300 $150 $100

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