ANNUALIZED FIXED COST VARIABLE COSTS (PER UNIT) ($) OF PLANT & EQUIP. LABOR MATERIAL ENERGY PROCESS TYPE Mass 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 10

ANNUALIZED FIXED COST VARIABLE COSTS (PER UNIT) ($) OF PLANT & EQUIP. LABOR MATERIAL ENERGY PROCESS TYPE Mass 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 10

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter19: Pricing Concepts

Section: Chapter Questions

Problem 6DRQ

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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: 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?

ANNUALIZED
FIXED COST
VARIABLE COSTS (PER UNIT) ($)
OF PLANT &
EQUIP.
LABOR MATERIAL ENERGY
PROCESS TYPE
Mass
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
10

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