Question

Two production methods are being compared. One manual and the other automated. The manual method produces 10 pc per hour and requires one worker at $ 15.00 per hour. Fixed cost of the manual method is $ 5,000 per year. The automated method produces 25 pc per hour, has a fixed cost of $ 55,000 per year, and a variable cost of $ 4.50 per hour. Determine the Break – Even Point (BEP) for the two methods; that is, determine the annual production quantity at which the two methods have the same annual cost. Ignore the cost of material used in the two methods

Answer 1

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