A company is considering investing in one of the production processes identified below. The company anticipates charging $12 each for each new unit of output it will produce.
First process FC = 170,000 VC = 7$/unit
Second process FC 200,000 VC =$6/unit
A. Determine the break-even level of output for each of the processes.
B. If the company CFO, “Rowdy” Rob Robert’s goal is to make a target profit of $100,000, determine which process requires producing and selling the smaller quantity to achieve this target.
C. Suppose the company’s new CEO, “Trembling Joe” Green thinks that a profit of $50,000 is a safer bet than the CFO’s estimate. Overruling the CFO, Green wants to know which process requires a lower level of production to achieve his target profit.