Metters Cabinets, Inc., needs to choose a production method for its new office s
ID: 409103 • Letter: M
Question
Metters Cabinets, Inc., needs to choose a production method for its new office shelf, the Maxistand. To help accomplish this, the firm has gathered the following production cost data:
Mass Customization
Metters Cabinets projects an annual demand of 24,000 units for the Maxistand. The maxistand will sell for $120 per unit.
a)Which process type will maximize the annual profit from producing the Maxistand?
b)What is the value of this annual profit?
Process Type Annualized Fixed Cost of Plant and Equip. Variable Costs Labor Material EnergyMass Customization
$1,260,000 30 18 12 Intermittent $1,000,000 24 26 20 Repetitive $1,625,000 28 15 12 Continuous $1,960,000 25 15 10Explanation / Answer
Answer:
a) Intermittent process type will have the maximum annual profit
B) annual profit of $2,00,000
Process Type Annualized Fixed Cost of Plant and Equip. Variable Costs Total variable cost per unit Variable cost for 24000 unit Total cost for 24000 unit Sale amount for 24000 unit Annual Profit A Labor Material Energy B B*24000 A+B C (120*24000) C- (A+B) Mass Customization 1260000 30 18 12 60 1440000 2700000 2880000 180000 Intermittent 1000000 24 26 20 70 1680000 2680000 2880000 200000 Repetitive 1625000 28 15 12 55 1320000 2945000 2880000 -65000 Continuous 1960000 25 15 10 50 1200000 3160000 2880000 -280000