Perfect Furniture is a manufacturer of kitchen tables and chairs. The company is

Question

Perfect Furniture is a manufacturer of kitchen tables and chairs. The company is currently deciding between two new methods for making kitchen tables. The first process is estimated to have a fixed cost of $78,000 and a variable cost of $76 per unit. The second process is estimated to have a fixed cost of $100,000 and a variable cost of $61 per unit. What is the point of indifference between both methods? tables (Round up your answer to 0 decimal places, the tolerance is +/-1.) (b) If the company produces 1,173 tables a year, which method provides a lower total cost? Process 1 Process 2

Explanation / Answer

after selling it achieve point of indifference $78,000 +76x=$100,000 + 61x x=22000/15=1467units cost process 1= 78000+ 1173*76 =167148 cost process 2=100000 + 1173*61=171553 process 1 is lower cost

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